Yes, you may still need to use a checkbook! There are many smaller businesses (restaurants, coffee shops, etc.) that still only accept either cash or check. Why? Because the business pays for the “privilege” of having you use your debit or credit card to pay them. They pay a fixed fee per transaction or a % of the transaction every time a customer uses a card. So, that means they make less money! Note that in many European countries checks have almost completely vanished.
So, what is a checkbook and how do you write a check?
How to Write a Check
All checks are the same in terms of what information you have to write on them. Basically you need to enter the following 6 pieces of information:
- Current date
- Payee: The name of the person or company you’re paying
- The amount you’re paying – written in numbers. E.g. 8.15
- The amount you’re paying – written in words. E.g. “Eight and 15/100.
- Your signature – to prove it’s you that wrote the check!
- Memo (optional)
You give the check to whomever you are paying, and they deposit it at their bank.
Be careful – you may have enough money in your checking account to cover the check when you write it. The key is to still have enough money there when the person you paid deposits the check and your bank tries to pay them from your account! If your check bounces (gets sent back unpaid) you can be charged fees by the merchant and by your bank. Don’t let a $15 check turn into another $50 worth of fees! If you are going to be writing checks it always important to keep a record of the checks you have written.
How to Cash a Check
If someone writes you a check, what do you do with it? You have three options:
- Take it to your bank branch and deposit it in your account. You will fill out a deposit form and sign the back of the check and give them both to the Teller. The money will show up in your account in a few days
- Deposit the check at one of your bank’s ATMs. You will need a debit card to do this. The ATM will take your check and read it, and ask you to confirm the amount of the check, before depositing it in your account. Again, the money will take a few days to show up in your account.
- Use your bank’s mobile app to scan the front and back of the check and deposit it electronically. There is usually a limit on the maximum amount of the check when depositing electronically.
Account Number and Routing Number?
So what are those funny looking numbers at the bottom of a check? They are computer-readable numbers that consist of the check number, the routing number and your bank account number.
- Routing Number
- This is a number that central check clearing processors use to know where to send your check to. Each bank has its own Routing Number.
- Account Number
- This is your account number. Each individual account has its own unique account number. This is how the bank knows which account to pull the money from to pay the check.
- Check Number
- Each check has its own check number
Pros and Cons for Using a Check
Here’s some more in-depth pros and cons of using a check.
- Check payments still make up over 50% of business-to-business payments. So if you ever expect to own your own business, expect to be using checks.
- Checks can be written for any amount. So writing a check for 100’s of dollars is easier than carrying around cash.
- The money doesn’t leave your account until the other person deposits it in their bank. This gives you time to cancel or place a hold on the check if something goes wrong.
- Checks can be cancelled. If you lose a checkbook, you can cancel all the blank checks in it.
- They’re harder to track in online budgeting tools like Mint.com
- Checkbooks are big and can be a pain to carry around
- If you lose your checkbook and don’t know it, it’s pretty easy for someone to write checks on your account.
- If you do not keep an accurate record of the checks you have written. You can forget what checks you wrote and the people you wrote them to can wait weeks or months to deposit them, and then you can get into an overdraft situation.