Paying by Check: Everything You Need to Know

According to an FDIC survey, as of 2019, 95% of households in the United States had accounts with banks or credit unions. That’s the highest percentage of households with bank accounts since the FDIC started keeping these numbers in 2009. It may feel like bitcoin and digital accounts are taking over, but that people aren’t getting rid of their bank accounts just yet. So, does paying by check still make sense, and how do you go about it?

What Is a Check?

A check is a document that provides instructions for your bank on what to do with funds in your checking account. In traditional form, a check is a piece of paper that includes the following information:

Your name and contact information (typically preprinted)
A preprinted routing number that identifies your bank
A preprinted account number that identifies your individual account with that bank
Preprinted check numbers to help the bank (and you) keep track of what payments were processed
Space for you to write information, including:
- The date of the check
- The amount of the check (in numerals and words)
- Who you’re paying
- Your signature
- A note about the check for your own records

When you write a check and give it to someone, they deposit it into their bank. Their bank uses the information on the check to communicate with your bank. The information tells the banks what you intend to do with your funds.

For example, if you write a check to John Smith for $50, you are telling your bank to take $50 out of your bank account and give it to him—either by putting the funds in his account or giving him the money directly.

A check doesn’t have to be a printed document. An eCheck is an electronic document that contains all the same information. For example, you can pay online in some cases by entering all the information—including the routing and account numbers—to create an eCheck that also instructs the bank.

What Happens When You Pay with a Check?

Whether you hand someone a paper check or pay online using your checking account information to create an electronic check, what happens next is the same.

After the vendor or individual accepts your check as payment, they present it—or the information on it—to your bank. This is done in a few ways:

People can present the check directly to your bank to cash it by walking into a branch location or using an ATM with check cashing ability.
People can deposit the physical check into their bank by walking into a branch location or using an ATM with check cashing ability.
People can mobile deposit the check via their cell phone by capturing pictures of it and uploading it using their bank’s app.
Vendors may scan the check through their payment systems, immediately converting it to an eCheck.

The information from your check is sent to your bank account, which then follows through on your instructions. That means taking the funds from your account and crediting the other person’s account or sending funds to their bank so their bank can credit their account.

The timeline of this process depends on how your check is handled. If you use an eCheck or the vendor converts your paper check into an electronic transfer, the money typically comes out of your account the next business day. Some larger retailers use processes that are even faster and can lead to a hold on your account for the funds the same day.

Otherwise, it can take up to a few days. Since you never know how long it will take, you must ensure you have enough money in your account to cover any check you write before you write it.

What Happens when You Don’t Have Enough Funds to Cover a Check?

If a check is presented to your bank and your account doesn’t have enough funds to cover it, depending on the terms of your bank, the bank often sends it back. Many vendors and banks present a check a few times, so if it’s just a timing error, the check may eventually clear.

However, your bank may charge you a fee every time a check is presented and you don’t have enough funds to cover it. If the check bounces, which means it never clears, you could owe the vendor or individual extra fees—on top of the original amount you owe them—too.

The average overdraft fee amount in the United States as of 2020 is $33.47. That’s how much your bank charges you. The person you pay could charge you even more if you bounce a check.

If you do bounce a check, the vendor will likely contact you for the payment. It’s important to make good on the payment as soon as you can. The vendor may require cash or a money order and is unlikely to accept another check.

If you don’t make payment to cover the check, the vendor can report you to local authorities and you could end up in legal trouble over the matter. Generally though, you end up in collections over the money, and that can hurt your credit.

How to Pay a Bill with a Check

In 2021, many people use bank debit cards to access the money in their checking accounts. But checks can still be useful. According to a survey of more than 3,000 check users, almost 60% of the time a check was written, it was to pay a bill.

You can pay a bill with a check in several ways:

By writing a check. Fill out the check with the name of the company you’re paying, the amount you want to pay, and your signature. It’s a good idea to write the account or statement number in the memo field of the check just to ensure the payment posts to the right account. You can then drop the check off or mail it in.
By paying with a check online. Many credit card, loan, utility, and insurance companies make it easy to pay online with a check. You typically have to enter the routing and account number from your check and then indicate how much you want to pay and when. Often, you can save the payment information so you can pay with a check in the future without entering the routing and account number again.

Where Else Can You Use Paper Checks?

You can use paper checks anywhere they’re accepted. According to the survey of 3,000 check users:

7% of checks are used to pay another person
12% of checks are used to donate to charitable or religious organizations
6% of checks are written at grocery stores and gas stations
17% are used to pay other types of merchants, including retailers and service providers

Are Checks Widely Accepted?

Checks are still fairly widely accepted, particularly at larger retailers and for purposes such as paying bills. In fact, if you’re making a large payment to a provider, they may be more willing to accept a check than a credit or debit card. Merchants have to pay fees on credit and debit card purchases that they don’t have to pay on check or cash payments.

Many smaller businesses, however, do have policies of not accepting checks, as checks can be a risk. If one bounces, the person or business accepting it as payment is potentially out those funds. This leads businesses to limit how they accept checks or not accept them at all.

The Bottom Line on Paying by Check

Checks are still valuable financial tools, and there may be times when you need to use them. But it’s also a good idea to have other payment methods lined up so you can be flexible when checking out or paying for goods and services. Cash, debit cards, and credit cards are all potential payment methods to have on hand, as checks aren’t always accepted.