Finances 101: The outstanding check
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You've probably seen a check lying around that hasn't been cashed yet. That's what we call an 'outstanding check'. It's waiting to be taken to the bank or scanned into an app. But until that happens, it's just hanging out in the banking world's version of limbo. That’s what it means to be an outstanding check. Let’s take a closer look.
What is an outstanding check?
An outstanding check is a check you've written that hasn't been cashed or deposited by the recipient yet or hasn’t been cleared by the bank or financial institution receiving it. You've done your part by writing the check, but until the other party cashes it, it remains “outstanding.”
Why should you care about outstanding checks?
You might think, "So what? The check is out of my hands." But here's the catch: While the check is outstanding, the money is still in your account. If you're not careful, you could accidentally spend that money and end up overdrawing your account when the check is finally cashed or cleared. This can result in overdraft fees and possibly damage your credit score.
Additionally, outstanding checks can affect your budgeting and financial planning. You may think you have a certain amount of money available, but if there are outstanding checks that haven't been accounted for, you could end up overspending.
How can you keep track of outstanding checks?
Be a financially smart family!
The best way to keep track of outstanding checks is to regularly review your bank account statements and reconcile them with your checkbook or budgeting software. This will help you identify any discrepancies and ensure that all outstanding checks have been accounted for.
Another useful practice is to write "outstanding" on the memo line of the check when you write it so you can easily track every check you write. Note the check number, the amount, who it's written out to, and what it’s for. Then, regularly review your bank statements and reconcile the balance, deposits, and withdrawals with your records. This way, you'll know how much money you really have available.
FAQs
Q: What is an outstanding check?
A: An outstanding check is a check you've written that hasn't been cashed or deposited by the recipient yet or hasn’t yet been cleared by the bank.
Q: Why should I monitor my outstanding checks?
A: Monitoring your outstanding checks helps prevent accidental overspending and potential overdraft fees. It also helps keep your budget and accounts balanced, especially if they go uncashed for a long time.
Q: How can I keep track of my outstanding checks?
A: Keep a record of every check you write. Regularly compare your records with your bank statements to ensure you know how much money you truly have available.
Q: What happens if an outstanding check is never cashed?
A: If a check is never cashed, it eventually becomes a stale or expired check, usually after six months. But check with your bank about their policy.
Q: Can I stop payment on an outstanding check?
A: You can request your bank to stop payment on an outstanding check. But sometimes that involves a fee, so contact your bank to find out.
Q: What if I lost an outstanding check?
A: If you lose an outstanding check, contact the issuer or recipient and stop payment as soon as possible.
Q: Could outstanding checks affect my credit score?
A: If you overdraft your account because you forgot about an outstanding check and fail to pay overdraft fees, it could negatively affect your credit score.
Q: How long does it take for a check to become outstanding?
A: It depends on your bank. Usually, it takes 2-7 days for a check to clear, depending on the institution.
Q: What's the difference between an outstanding check and a bounced check?
A: An outstanding check is one that has been issued but not yet cashed or cleared. A bounced check is one that cannot be processed because the account holder has insufficient funds.
Q: Is it possible to have an outstanding check without knowing it?
A: This can happen if you forget about a check you have written or received or if the recipient delays cashing the check.
Q: Can a bank tell me if a check has been cashed?
A: Yes. Most banks can inform you if a check you have written has been cashed or is still outstanding.
Q: What should I do if an outstanding check becomes stale or expired?
A: Contact the recipient (or issuer if you’re the recipient). Try to stop payment on the original check and issue a new check. Be sure to record this in your check register.
It’s important to be aware of outstanding checks and to resolve them quickly. By keeping track of every check you write and regularly cross-checking your records with your bank statement, you can avoid unnecessary delays, fees, and other budget pitfalls. A well-managed bank account is a stepping stone toward a secure financial future.
For more smart money tips, visit the Greenlight's Learning Center to help you manage your income effectively.
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