Making a payment with a check and then changing your mind can be an expensive proposition. Putting a stop-payment order on that check will cost anywhere from $18 to $32 at the10 largest banks surveyed by Bankrate.com.
How much you pay for trying to stop payment sometimes depends on where you live. For example, if you're a Bank of America customer you'll pay $20 if you're in California. But in Oklahoma you'll pay $25, and $30 in Maryland. Washington Mutual customers pay from $18 to $29, depending on their state.
Stop-payment fees are among the highest fees banks charge; right up there with fees for bouncing a check. Industry experts say that, in part, they're high because of the effort it takes to catch the check before it's paid and manually process it. But the main reason for high fees is the risk the bank assumes, says Mary Beth Guard, attorney and editor at BankersOnline.com. "The fees for some of our retail bank products and services may vary from state to state in order to be competitive and, generally, our prices are below many of our competitors," says Mary Kelley, Washington Mutual vice president of consumer group public relations.
"When a bank accepts a stop-payment order, they're saying, 'OK, you've written a check and given it to the payee and now we're going to play defense for you and keep this check from being debited from your account.'
"In a lot of ways it's analogous to a guarantee. If the customer makes a timely stop-payment order and gives an adequate description of the check and the bank accidentally pays the check, then the bank is liable to the customer for the amount of the check."
But if the stop-payment order isn't made quickly enough, or if the customer can't adequately describe the check -- the check number, payee and amount -- then the bank is not responsible. The bank has to be given adequate time to notify all of its branches of the order. Once the check has been paid, the consumer is on his own in trying to retrieve the money from the person who cashed the check.
The Uniform Commercial Code is a set of statutes that deals with, among other things, negotiable instruments, and governs some aspects regarding stop-payment orders. But the UCC doesn't stipulate things such as fees, which may be different from state to state.
Some states, for instance, don't allow a fee to be assessed if you put a stop-payment order on a check written on a home equity line of credit.
"Any time a customer draws on their HELOC, they're raising the debt level against their dwelling," Guard says. "The law favors actions that prevent consumers from doing stupid things with their home. So, if someone makes an unwise purchase and then reconsiders, by not allowing the bank to charge a stop-payment fee, the legislature is making it a little bit easier to avoid further encumbering the dwelling."
Written stop-payment orders are good for six months. You can call your bank and make an oral stop-payment order, but it will expire after 14 days if you don't come into the bank and put it in writing. A stop-payment order can be renewed for an additional six months. Guard advises renewing the stop-payment if the check hasn't turned up.
"Say you wrote a check for a vacation scam. The scammers know you'll put a stop-payment on it, but they also know that unless there's a special agreement with your bank the order will be valid for only six months. They may wait until after six months to cash the check. If your checkbook is stolen it may be best to close the account and open a new one."
You can also put a stop-payment order on money orders. Look for an 800 number printed on your receipt.
Cashier's checks are different, because they're drawn on the institution's account, not yours, and are considered an irrevocable promise to pay. Some institutions, however, will in fact refuse to pay them under certain circumstances. Ask about the policy when you take out the check.
Wachovia, for example, uses the same stop-payment policy as it does for ordinary checks.
"The customer can call, provide the item number and stop the payment," says Mary Beth Novarro, communications manager at Wachovia.
"It's important to keep the receipt that comes with a cashier's check or other similar item to make the stop-payment easier. If a customer can't find it, the financial center where the item was purchased can try to find a copy of the receipt."
The Bankrate.com survey also looked at the fee that these same institutions charge customers for returned deposit items. If you deposit a check that bounces, you'll be out the amount of the bounced check, and you'll also be charged a fee for a returned deposit item. It seems a tad unfair; like being victimized twice. But banks say it's your responsibility to know who is giving you a check and whether the check is good.
The fees range from $5 to $10, with most institutions charging one fee regardless of where you live. Of the banks we surveyed, only Wells Fargo varied the fee by state.
Banks saddle checking accounts with a wide range of fees. The best way to avoid paying excessive fees is by finding a checking account that fits your needs. Bankrate.com's semiannual Checking Account Study can help keep money in your pocket.