What a Check Is, Exactly

Let's make one thing that clear right away: despite what we may think of them, checks are not, in fact, a form of payment, the way that currency and coins are. Since their very beginning, checks have been a promise of payment rather than the payment itself. While this distinction may seem like splitting hairs, in fact there's a significant difference between a payment and a promise to pay. If you hand a person a banknote or a stack of coins, the debt is paid instantly. However, a check is a bit more complex. Your check is your earnest pledge to pay someone the amount written on the check, once they have presented it to the proper cashier or bank. That entity will then attempt to honor the check. That's easy enough, and it usually works just fine.

However, here's where it gets sticky. If for any reason the bank can't or won't honor the check, it's you who pays the price (often quite literally). If you don't have enough money in your checking account or if the bank finds some other reason to deny your check, the promise between you and your creditor is broken -- and guess who has to make good? That's right, you. This is true even if the check is perfectly good, but is rejected simply because of a bank's policies. For example, suppose a bank demands a fingerprint from the depositor and he won't surrender one, for perfectly legal reasons having to do with personal privacy. The check is denied, and you're stuck with an expensive returned-check fee. This is no random example; it has actually happened. Fortunately, banks honor the vast majority of the 42.5 billion checks that are written each year, and that's good enough for most people. After all, 98.95% of all checks clear the bank just fine. It's true that maybe 450 million checks bounce every year, but that's a tiny 1.05% of the total written. Clearly, most people are pretty good at balancing their checkbooks.

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