Checkbooks 101: How do checks work?

What the heck is a check, anyways? How do checks work? Does anybody still use these things? 

As it turns out… yes, they do! In fact, Americans wrote 14.5 billion checks in 2018. People commonly use checks for paying rent, giving gifts, and making major purchases.

For teens, checks can seem like old news. And indeed, they’re incredibly old-school — checks actually date back to the ancient Roman empire, believe it or not!

But there are still situations where teens may need to understand how checks work. Pull up a chair — here’s what you need to know. 

What is a check? Checkbook 101

A check is an instrument that tells your bank to transfer a specific amount of money to the recipient of the check. It’s essentially a note to your bank saying, “Hey, please transfer (this amount of money) to (this person or company), here are my account details.” 

Paper checks are attached to checking accounts and offered by banks, credit unions, and other financial institutions. They include your account numbers right on them. If you have a checking account, you can ask your bank for a few blank checks or get a checkbook. 

You can also request that your bank write a check on your behalf, known as a cashier’s check. This is a check drawn from the bank’s own funds, not yours, and signed by a cashier or teller. You usually use a cashier's check for a large purchase, supplying the funds to the bank ahead of time. Most times, there is a fee involved as well.

There are a few different types of checks, including personal checks, cashier’s checks, payroll checks, and certified checks. They all work similarly — but this guide will focus on personal checks, the most commonly used by individuals. 

How do checks work?

Checks enable the transfer of money from one person to another. Just like Venmo, but with more paperwork. 

Here’s how it works:

1. The check writer (known as the payer) fills out the check 

2. They include the amount of the payment, the recipient (known as the payee), the date, and a signature

3. The check is then given or mailed to the recipient

4. The recipient can then deposit the check into their account or cash it

5. The recipient’s bank uses the information on the check to withdraw money from the payer’s account

For example, say you’ve just moved and need to pay your first month’s rent. You could get checks from your bank, which already include your bank account number and the bank’s routing number.

From there, you could fill out a check with the payee’s name (the landlord or property management company), the date, and the amount of the rent. You’d also need to sign the check. 

When you mail or drop off the check, the landlord will deposit it at their bank. Their bank will then use the info on the check — the account number, routing number, and payment amount — to initiate a transfer. The money will then be taken out of your checking account, usually within a few business days after the check is deposited. 

Make sure you have sufficient funds in your account to cover the check. Otherwise, you could be hit with fees and penalties! Your bank can charge you an overdraft fee, and the merchant may also charge a bounced check fee. 

How do you write a check?

How do checks work when you’re trying to write one? 

First up, you’ll need a checkbook. Many checking accounts come with starter checks — you may have to pay a few dollars to order a checkbook, which includes blank checks to write. 

Next, fill out the personal check with the following information:

• Date: Today’s date

• Pay to the order of: This is the person or small business that you want to pay, for example, “Jai Sethi” or “Evergreen Rentals” 

• $ amount: Write out the amount of the check, in decimals, for example: “$500.00”

• Dollars: Write out the amount in plain English, as in “five hundred”

• Memo/Note: Add an optional note for what the payment is for, like, “rent” 

• Signature: Your signature 

There are a few confusing things on checks that can leave you stumped at first glance. First off, why do you have to write the amount of the check twice?

This is for fraud prevention purposes. The thinking is that if you write $500 in the amount box, someone could add a 0, making it $5,000! So, you fix this by also writing out “five hundred” in the line below it.

If you’re writing a check for an amount that includes dollars and cents, like $125.50, you write this as “One hundred twenty-five and 50/100.” Include the cents even if it's an even amount, like "One hundred fifty and 00/100."

Also confusing but good to know: “Dollars” is already written for you, so you just need to write “five hundred,” not “five hundred dollars.” 

Second off, where do you actually sign? The signature line is generally on the lower right-hand side of the check. It’s often just a blank line with no explanation. Or sometimes, it’s marked “NP.”

You may notice three sets of numbers on the bottom of each check. These are your bank’s routing number, your personal account number, and the check number. 

The routing number and account number are used by banks to process check transactions — but don’t worry, you don’t need to do anything with these numbers yourself! Just be sure to keep your checkbook in a safe location so that it doesn’t wind up in the wrong hands. 

The third set of numbers you will see at the bottom of the check (as well as in the top right-hand corner, in some cases) is the check number. Each check has its own unique number — so a book of 50 checks might start with #0001 and go up to #0050. You also don’t need to do anything with this number, unless you’re keeping detailed records or “balancing” your checkbook (an old-school way of double-checking your transactions). 

How do you cash a check?

How do checks work on the receiving end? Good news: Cashing a check is way easier than writing one — and more fun! 

To cash a check, you’ll first need to endorse it. This just means you need to sign the back of the check. You’ll see a line that says “endorse here.” 

Note: Once a check is endorsed, anyone can cash it. So it’s safest to wait to endorse it until you’re actually cashing the check. 

From there, you have a few different options to deposit or cash a check:

• Mobile deposit: Log into your mobile online banking app and look for a mobile check deposit option. You’ll take a picture of the check and upload it to the app. 

• Bank branch deposit: Visit your bank and tell them you’d like to deposit a check. They’ll take it from there!

• ATM deposit: Visit an ATM, insert your debit card, and fill out a deposit slip. Follow the instructions on the ATM to deposit the check. 

• Check cashing: You’ve likely seen check cashing services at corner stores and retailers. These services will cash checks for you for a fee. This is only worthwhile if you don’t have a bank account. 

Keep in mind that check processing can take a few days and is generally slower than electronic payments. You will have access to the funds from the check once the check-clearing process finishes after a few days. 

Checks = old news. Greenlight = modern money mojo.

Checks are indeed a bit old-fashioned — ancient, in fact! But you still may need to know how to write one on occasion. Fortunately, it’s not too tricky once you know the check lingo. 

Are you looking for a much more modern, much more fun solution for your money management? Try Greenlight today! Greenlight’s money app and debit card help kids and teens manage their money, learn to save and invest, earn rewards, and much more.