Postdated: What It Means, How It Works, Risks

Since a time lag exists between when a person writes a postdated check and when a banker cashes it, sensitive information can remain exposed and vulnerable for days, weeks, or even a month. Identity theft occurs when someone obtains personal or financial information of another person in order to assume that person’s identity to make transactions or purchases. Payday loans customers frequently use postdated checks to repay their lenders. An individual borrows a small amount (usually $100 to $1,500) at a very high rate of interest.

They may not have access to credit cards, forcing them to use the services of a local or regional payday loan company. To add further risk, payday loans can be rolled over for additional finance charges. For instance, someone with a car loan can schedule postdated payments to be transferred electronically from their account to the lender. It’s risky to rely on postdating or processing delays to ensure your check clears. Financial institutions now send digital pictures of checks to other financial institutions, so they can be cashed more quickly. This is typically done with the intention that the check recipient will not cash or deposit the check until the future indicated date.

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. (3) For the purpose of determining whether a post-dated instrument is a cheque, the fact that the instrument is post-dated shall be disregarded.

Just because it’s legal to write a postdated check doesn’t mean things will work out the way you intended. The date you choose to use is not part of a legally binding agreement between you and the payee. In most cases, the recipient can deposit the check at any time, and the bank is free to pay funds out of your account before the date shown on your check. Keep in mind, though, that banks and credit unions can cash postdated instruments early. While they may not do so intentionally, there are cases when checks are put through by mistake.

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When you have a postdated check, find out if the check was intentionally postdated and figure out a solution. In Serbia post-dating cheques is a customary practice in the retail industry. 2) the reverse, in which a person is promised goods or services but does not receive them and has to stop the cheque.

1. This is typically done with the intention that the check recipient will not cash or deposit the check until the future indicated date.
2. You may have further recourse against your bank for any other expenses you face.
3. 2) the reverse, in which a person is promised goods or services but does not receive them and has to stop the cheque.

He receives checks from some renters on the 28th or 29th of the month that are dated for the first of the next month. He suspects his tenants do this to keep him from cashing their rent checks before they’ve been paid, so their rent checks don’t bounce. In banking, a post-dated cheque is a cheque written by the drawer (payer)[1] for a date in the future. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional.

On June 4, when the supplier receives Jim’s postdated checks, the supplier should not debit cash nor credit accounts receivable. The reason is that the checks cannot be turned into cash prior to the dates shown on the checks. A payday borrower typically writes the lender a postdated personal check for the amount of the loan plus a fee. The lender cashes the borrower’s check on the agreed-upon date, usually on the borrower’s next payday. But in some cases, the payer may provide the payee with a postdated payment.

Post-Dated Check

In this situation, the check is considered a negotiable instrument, irrespective of the date, and it is likely that the recipient will receive cash from the bank prior to the date on the check. In such a situation, it is allowable for the check recipient to record a post dated check upon receipt of the check. If you have the option, it is best to avoid writing postdated checks.

A post dated check is a check on which the issuer has stated a date later than the current date. It is used when the issuer wants to delay payment to the recipient, while the recipient may accept it https://www.kelleysbookkeeping.com/what-is-an-average-ledger/ simply because the check represents a firm date on which it will be able to deposit the check. This approach is used to improve the odds of being paid, especially when the issuer has little credit.

“From a criminal law perspective, there is nothing inherently illegal about postdating a check,” says Eric Hintz, a criminal defense attorney in Sacramento, California. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. We believe everyone should be able to make financial decisions with confidence. (2) A cheque is not invalid by reason only that- (a) it is not dated; (b) it is antedated or post-dated; or (c) the date it bears is a Sunday. When opening a bank account, typically documentation and proof of identity are needed to get the application and review process started.

For instance, a teller may not notice the date on the check and process it that day. Or an individual may deposit a check through the automated teller machine (ATM). If the check goes through and bounces, the payer may be responsible for an NSF charge. Realistically, the recipient what is the difference between deferred revenue and unearned revenue of a post dated check may never notice that the check has been post dated, and so will record and deposit it at once. The bank is also unlikely to notice the date on the check, and in any case may have a policy of honoring all checks at once, irrespective of the check date.

Tips for Receiving a Postdated Check

For example, $17.50 per $100 for seven days can translate to a rate of more than 900% on an annualized basis. ABC International receives a $500 check payment from a customer for an unpaid invoice on April 30. ABC should not record the cash receipt until May 15, nor should it reduce the related accounts receivable balance until May 15. Thus, the post dated check has no impact on the financial statements of ABC International until the date listed on the check. Luckily for them, Foster waits to cash postdated checks, but he isn’t legally obligated.

What is a Post Dated Check?

Adopted by nearly every state, the UCC is a standard set of business laws that was first published in 1952 to regulate financial contracts. Article 3, Section 113 of the UCC outlines the rules for postdated checks. This section allows financial instruments to be either post or backdated and indicates that the payment cannot be made until the specified date on the instrument. Whether a post-dated cheque may be cashed or deposited before the date written on it depends on the country. A Canadian bank, for example, is not supposed to process a post-dated cheque and if it does so by mistake, the cheque writer may ask their bank to correct the error.

This means that the instrument used to make the payment is dated for a specific date in the future. Banks and credit unions generally state rules about postdated checks in their account disclosures. Some of the biggest banks, for example, note specifically that they can honor checks that are made out for future dates. The term postdated refers to a payment that is meant to be processed on a specified date in the future.