Cheap checks can cost you

If you buy your bank checks directly from a discount printer instead of purchasing them through your bank, you'd better hope they don't rip or tear during processing. If they do, you might be charged a fee.

Some banks are charging $2 or $3 per rejected check, and at least one bank is smacking customers with a $5 fee.

The fees seem to apply only to mail-order checks or checks printed by individuals, even though checks ordered directly from banks are also sometimes rejected during processing and many mail-order checks come from the same companies that print checks for banks. 

By just about everyone's estimation, the number of checks rejected for quality reasons is quite small, maybe 1 percent of the more than 40 billion checks processed annually. That includes checks that were stapled, folded too many times or mangled in some fashion. But more specifically, the problem that banks are complaining about centers on the paper and toner quality of some checks purchased directly from online or mail-order companies -- or checks that are printed at home.

Rejected checks
"There are standards in check printing, and if you get checks without the proper standards the paper can tear during processing," says John Hall, spokesman for American Bankers Association. "It's not uncommon to find banks charging a fee. While most mail-order checks are good, there are outliers that cause problems for the entire checking system."

Hartford Savings Bank in Hartford, Wis., charges $3 for each rejected check. Bob Klockow, the bank's operations manager, says they've noticed problems for the past 10 years.

"It's not a really big problem, but it got to the point where there were enough that we decided to address it with a fee. We get charged by the processor for each item that has to be individually processed."

While some institutions may impose a fee the first time a customer's check is rejected, Hartford Savings tries to work with the customer.

"We look to see if it's a chronic problem with that customer. We'll ask where the checks are made, and if it's a second party we'll warn them that it's causing a problem and will cost $3 per check if we can't read them," says Klockow.

Generally, it appears to be smaller institutions that are instituting fees. Most of the larger banks contacted say that if they encounter the problem they repair and process the checks. And at least one institution, Minneapolis-based US Bank, has rescinded its $2 fee in favor of working directly with a customer when there's a check-quality issue.

$5 charges
One bank, Fulton Savings Bank in Fulton, N.Y., charges a punishing $5 for every check rejected for quality issues.

"We don't seem to have too many problems," says Michael Pollock, bank president and CEO. "We like people to use the checks we have. We encourage people to use our checks."

Fiserv, based in Brookfield, Wis., is one of the nation's biggest check processors, sorting through some 4 billion checks, annually, at more than 50 processing locations. Chuck Doherty, vice president, says poor check quality is a small problem but a growing one, due in large part to the proliferation of mail-order check companies.

"Magnetic ink, which is used to print the routing number, the account number and the check number on the bottom of the check, can flake off the cheaper checks from some mail-order services or checks that people might buy to print their own," Doherty says. "We have high-speed sorters that process 1,800 checks per minute. The necessary amount of ink might not be on the check, or if the paper isn't strong enough, the check might not process correctly and it can jam the machine."