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Dr. Don Taylor, CFA, Bankrate.com advice columnist Do numbers or words count on a check?

Dear Dr. Don,
I have a question on the check-clearing process. I recently wrote a check to my mortgage bank for the usual payment amount of $1,573.13. But, in the written line I mistakenly wrote "one thousand seventy three and 13/100s."

The mortgage amount is always the same and I always pay the same amount on time. Needless to say, the mortgage bank processed the check for the smaller amount, the mortgage was not credited, the funds went into a suspense account (since they do not accept partial payments) and I also incurred a late charge. Luckily, I caught this and mailed in the remainder of the payment before the next payment was due. I am now struggling to have the late charges reversed.

My question is two parts: first, which bank encodes the check for the processing amount (the payee or payer) and second, if the written amount differs from the numerical amount of the check, which is correct or legal?

-- M.B. Mix-up
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Dear M.B.,
When the check courtesy amount (box) and the check legal amount (line) don't match on a check, it's easy to guess which one is used for check clearing.  It's the legal line where you write out the amount.

The payee bank encodes the check for processing because it receives the check and has to input the relevant variables into the check-clearing system like the amount, the accounts and the routing number. Your account information, except for the amount of the check, is encoded in the MICR (Magnetic Ink Character Recognition) line printed on the bottom of your check. The payee's deposit slip provides his account information. 

Check 21, which became effective in October 2004, allows the payee bank to process checks electronically so as to not require the return of a physical check back to the payer bank. A substitute check, essentially an image of the original check, is supplied to the payer bank. A Bankrate feature, "Check 21: New law ends checking traditions," has more about Check 21 as does this Federal Reserve Board publication.

If I were your lender, I wouldn't reverse the late charges. Partial payments aren't accepted, and you didn't make payment in full. How is this the lender's fault? Past payment history shows you to be diligent in paying your mortgage and it's no doubt an honest mistake, but it's still a mistake. Why would you think that you don't owe the late fee? If you asked and the lender said no, I'd leave it at that and end this struggle.

Have you considered online bill pay or direct debit as a way to automate your mortgage payments? You'll save the price of a stamp, and late payments should never be an issue again. A Bankrate feature, "Online banking," has more information about online banking.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & investing" or "money."

Bankrate.com's corrections policy-- Posted: March 30, 2007
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