If you’ve ever had a problem with a check where either you discovered it was sent to the wrong party, was lost or stolen, or in some way is going to go to someone it shouldn’t, you typically think of doing a stop payment. With banks being fee happy, you have several options to pay less to do this. I’ll go into ways that you can reduce those fees you’d have to pay, and even to as low as zero if you want. It will also allow you to protect yourself against someone raising the value of a check and making it impossible for them to get a whole lot of extra money.
When I proposed some of these to an associate of mine, she felt they were too much hassle. Well, consider whatever your bank or credit union charges for a stop payment, if it takes 1/2 hour to do one of these, double this and that’s the equivalent of what you’re effectively “making” per hour for doing this, e.g. if it costs 20 GB pounds or US$35 to stop payment on a check, then following the suggestions I give here. allowing your check to be effectively stopped for free is the same as if your time is worth 40 GB pounds per hour or US$70 an hour. Unless your time is worth that much it will save you money to take a little extra time to use some of the suggestions I propose here. Further, if you take some free time to set some of these things up in advance, it could effectively cost you nothing at all.
Since I’m in the U.S. I’ll explain how to do it in terms of what you can do here including costs in U.S. dollars, but in general these ideas can be used anywhere that you can either close a checking account and open a new one at no cost or where banks offer free checking accounts.
First thing is to consider how much the check is worth. If the check is worth $35 or less and there’s not a lot of time to do something about it, don’t even bother stopping payment. It will cost you less even if you have to pay the check than to issue a stop. I mean, unless it’s because you’re mad at whoever you wrote the check to, it makes no sense to spend $35 to stop payment on a check worth $5.
But I promised to show how to actually do a stop payment for free and I’ll do that. The cheapest way to stop payment on a check is simply to make the check worthless, and to do that, you have to close the account it’s drawn on. And that’s basically how you’re going to do it, because you can close an account for free. (Be sure you don’t do this on an account if you opened it to get an account opening bonus or you’ll have to pay the bonus back; better to use that only to deposit checks and use it to transfer money to other accounts until the time you have to keep the account open to keep the bonus passes.) You inform the bank that you need to close the account, and you open a new one.
Oh, and stop buying checks from your bank, you’re paying the kind of prices “like buying cigarettes at the airport.” Third parties offer checks for prices of 1/2 or less what your bank is going to charge, and for a lot of these third-party printers, if it’s your first order, they offer even steeper discounts. Well, if you’re ordering new checks for every account, then every order is always a new order and you’ll get the lower cost rate than that of a reorder. If you’re a real cheapskate and it’s worth it, say the difference is $5 more for a reorder over a new order, and opening a new account is free, it might even be worth it to close an account and open a new one when you run out of checks!
Most banks are allowing you to open checking accounts for free, or you can simply open a new account on the same terms as the previous one. Your cost, if you close an account for a check that you would otherwise have to stop payment on, is now no more than that needed to toss and replace your checks for that account. With third-party printers offering check orders for $10 or less, this would be an ideal situation as it allows you to effectively stop payment for $10 or whatever a new order of checks would cost.
“But,” you’re going to say, “I can’t do that, I have other checks outstanding on that account that I can’t allow to be returned.” Well, what you need to do is open more accounts, especially if they’re free. You basically would want to open as many accounts as you typically write checks during the period of time that it takes for one to clear. If it takes a week for your checks to clear, and in a week you typically write five checks a week, then you’d open five checking accounts. Another advantage to this is that if you do this, you can leave just enough money in the account to cover a check you wrote, if someone changed the amount, the check would either not clear, or if the bank authorized an overdraft, you go back to the bank, refuse to cover the overdraft, and demand it be reversed as well as the check sent back as the check was fraudulently raised. The bank is going to be more receptive to your request since it’s their money that they’ve spent rather than yours.
Now, you might consider that if you have to do this, you’re having to throw away checks every time you do this so it’s still not completely free. I said I’d get to zero and we’ll get there, but now it takes a bit more work.
So, if you’re writing checks for paying bills you mail or places where they don’t use the magnetic stripe on the bottom of the check to accept the check, you can take advantage of a feature the banks got for themselves. Since the banks take advantage of us every time they can, we should do so when the opportunity occurs. In the U.S., there is a new banking rule called “Check 21,” which allows a receiving bank to only have to send an image of a check rather than the actual check to the bank it was issued on. Also, if a bank gets a check and for some reason the magnetic ink at the bottom doesn’t work, if they need it for processing, they’ll simply run the check through their equipment and add a strip at the bottom that does have a magnetic strip at the bottom. This means that what you can do is print your own checks on blank stock, and instead of having to have the magnetic ink at the bottom of the check, just print the account number using an MICR font. Since banks are now sending images of checks back to each other, it means they really don’t have to have magnetic ink at the bottom because your bank isn’t going to process your actual check any more, they’ll be handling an image of your check.
So now, having separate accounts for each check that you’re writing until they clear, if you ever have a check you’ve printed (as opposed to a check using preprinted stock from a check printer) go lost, you order that account closed, and just never print any checks for that account again. The advantage here is you never buy more checks for a new account, and the “cost” to stop payment on that check you printed is, guess what, zero!
If closing an account and moving the money costs zero, then if you only write one check at a time on an account, if you close the account before the check clears, that’s what it will cost you to stop a check on that account, As long as no other checks are pending on that account, closing the account will then not cause you any further problems with any other account and it costs you nothing.
So, by following my suggestion of opening multiple accounts adequate to allow any check you write to clear before using that account again, as well as only keeping enough money in any account to cover the checks you’re going to write on it, you can also protect yourself from check fraud hitting you for more than you expect. If you use preprinted checks the most it costs you to effectively stop payment on a check is the cost of throwing away whatever checks you have for that account and ordering new ones for a new account, or zero if you are printing your own checks on your computer using blank check stock.