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    Can Companies Legally Deposit/Cash A Post-Dated Check Early? Plus: How Do You Get Payments To Creditors On Time? And: How To Avoid Getting Popped With Late Fees
    May 27, 2004 

    Dear Ben: If I mail a check to a credit card company (or any company) and date the check the same as the due date, can they legally cash or deposit that check prior to that due date?  The "fine print" on the back of an invoice gives the following warning: "Please do not send post-dated checks. They will be deposited upon receipt."

    Iím trying to insure that the creditor has the check for my current debt well in advance of the due date, but I need to know that the money to cover that check will remain in my checking account until the due date before they can legally cash or deposit it.

    MD, via e-mail

    Dear MD:
    I considered chasing down the "by the book" UCC (Uniform Commercial Code, the laws-of-the-land that cover banking and leasing transactions) answer, but even my banker of the last 20 years asked the same question: Whatís the point?

    Theyíve clearly warned you that theyíll deposit your check when they receive it, so that alone should end the discussion. Debating the legality of cashing or depositing a check early is a losing cause. Even if youíre right and win the battle, youíll lose the war in the long runĖbut in the spirit of solving your cash flow-related challenge, letís play this scenario out.

    First off, itís important to note that nobody pays attention to the date on checks anymore. Youíve got to assume that anyone who has one of your checks in your hand is going to try to cash it immediately...meaning youíd better not circulate any checks that donít have the funds available to clear them. Giving a check to a trusted friend, family member or landlord (with whom youíve established a track-record over time) with the understanding that it will not be deposited before a certain date is an acceptable "bank float" risk worth taking. But sending an un-covered check for mortgage, car or credit card payments is an invitation for non-sufficient funds fees-induced disaster.

    The system is working against all of us. Itís a well-documented fact that the credit card industry has been quietly "moving the goal-posts" on consumers over the last few years by shortening the grace period by moving up the due date on their bills. Thanks to cardholders missing these subtle changes on their bills, the credit card industry has seen substantial increases in fee income generated by this simple move. And then thereís the banking industryís profit-driven decision to begin clearing checks in a way that increases their fee income. As first reported in this column in March, 1999: If several checks are drawn on the same bank account on the same day, the bank processes the largest check first, increasing the odds that checks presented later will bounce. The end result? Multiple bounced-check fees, a potential profit center that can generate huge profits for banks. A local bank representative confirms that this practice occurs in many North Texas banks. NationsBank revealed in testimony stemming from an Illinois lawsuit that they projected a $14 million jump in annual "fee revenue" by clearing the largest checks first. So are the banks a bunch of opportunistic mercenaries? Probably not. Out of 173 million checks processed every single day, 1.3 million of them are bad, costing the banks $615 million in annual losses from check fraud. Who pays? We do. How can you avoid being sucked into this trap? Easy. Make sure youíve got enough cash in the bank when you write a check.

    Dose of Dover For The Week: If your financial situation dictates your need to play the "bank float" game, donít rely on the post office to get your payments in on time. Almost every major creditor in this country has a "direct bank draft" system in place, allowing you to set specific dates to make payments on an ongoing basis, or special "one time" drafts of your bank account. It usually requires two business days to credit this electronic form of payment, but at least youíll have more control over the timing than the traditional 37-cent stamp crap-shoot. (Plus itís usually a free service.) Want more information? Spend some time on your individual creditorís websites.
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