Read the Paperwork
Whenever you open a new bank account, the bank is required by law to provide you with a list of its policies and procedures, including the procedures for clearing a check. In some cases, the bank processes the deposits for the day and then the debits, you checks. In other cases, the bank processes them in the order they were presented, so if the bank receives your check for payment before it received your deposit, even if they are on the same day, you might be looking at additional insufficient funds fees. Since most banks charge at least $30 for a check with insufficient funds and the business where the check was originally written may charge you $25 or significantly more for the returned check, you need to know how your bank works. The most consumer unfriendly banks process all the debits, your checks, first in a highest amount to lowest amount order before processing the credits.
Read the paperwork that says how your bank handles this. If you have lost or misfiled the paperwork into the local trash dumpster or recycling bin, call the bank and ask for another copy. Writing even one check with insufficient funds can cause a cascade effect as the bank takes out its fees before paying the other checks you wrote thinking you had enough money.
Learn the Law
Not too many years ago, when you wrote a check to a business, it would often take several days before the check could be mailed or hand-delivered to your bank for payment. That “float” time was something that many people exploited, knowing that they had a few days to get the deposit to the bank. Then the law changed allowing for the electronic presentation of checks. Now, as soon as a check is written, the recipient has the option of presenting it electronically for payment.
What that means for you is even if your bank is across the street from the grocery store, writing a check before you make the deposit is a very bad idea. Ask your bank about its procedures for processing an electronic check. Some banks will place a hold for the amount of the check on your account and then wait for a day or two to clear the transactions. Others treat electronic checks the same as a debit card and the procedure for the processing them is to remove the payment from your account immediately.
Most often, the retailer or other check recipient sends an electronic message to the bank telling them you have written a check and the amount it is for. Then, the electronic check is processed at the end of the day, along with the days other credits and debits.
When dealing with a bank account that is precariously low and the need to pay bills or buy groceries immediately, the first rule to avoid bounced checks is to make the deposit first. Then, ask your teller about the availability of the funds you just deposited. At many banks, the first $100 of a deposit is available immediately and the remainder is held for several days to verify the transaction. If your bank holds the deposit, ask about their policy regarding checks written against the pending balance.
In some cases, the bank procedures for clearing the check would recognize that there is a deposit pending and not process the checks until the deposit clears. Many other banks are not so consumer friendly. Ask to find out which yours is. If the bank will not hold checks until the deposit clears, consider withdrawing a portion of the deposit immediately to meet the day’s demands, groceries or gas for the car. Then, call your creditors and make arrangements to pay the bills the day the deposit clears. Even if you are mailing the check, it is best to wait until the deposit is official before writing the check.