You can stop payment on a check,
for a price -- and for a limited time only
By Pat Curry • Bankrate.com ^TM

Sooner or later it happens to all of us.

Maybe a tradesman says your check never arrived. Or your teenager loses the check for his class trip. Worse yet, your mortgage check is in your stolen purse, or your new used appliance blew up and you have no intention of letting the seller get his hands on your money.

So you decide to stop payment on that little piece of paper.

"Some people may not even be aware that you can stop payment on a check," says Dr. Irene Leech, vice president of the Consumer Federation of America and associate professor of consumer studies at Virginia Tech in Blacksburg, Va.

"It's done more rarely these days because so many of us use credit cards. I had a check for several hundred dollars get lost in campus mail. The guy it was going to was someone I trusted and I knew he would only cash one of them if the first one showed up, but all kinds of things can happen."

Simple, but expensive
The process is simple -- you go to the bank, give them the details on the check and sign a form -- but it's not cheap.

Charges from $27 to $35 are not uncommon, making it one of the highest charges assessed by financial institutions.

"Like the similar fee for bouncing a check, paying something like $30 to stop payment on a check is clearly a punitive charge," says Bankrate financial analyst Greg McBride.

And ancillary and punitive charges continue to rise all over America.

According to Leech "fees are the ways a lot of financial institutions are making their biggest money right now."

"It's a real important profit center. As a consumer, you have to think real hard about whether a stop payment is something you want to do. If it's not a real big dollar check, you might take the risk. If it's several hundred dollars, it's worth it."

Rick Inman, CEO of Tucker Federal Bank in Atlanta, says the process is a little more complicated than most consumers realize because of what a check represents to a bank.

"A check is a demand," he says. "From a bank's perspective, the writer of the check demands the bank pay whoever it's written to."

Beware the six-month rule
What they also don't realize is that there is a time limit on a stop payment -- typically six months for a written request. If you think there's a chance someone could cash a check after that expires, you would need to renew the stop payment -- and pay another hefty fee.

"A lot of stop payments are because things are lost in the mail or people left a check in their pockets," he says. "You assume that after six months, it won't be cashed."

But there are those rare instances when even six months isn't long enough.

Inman found himself explaining to a television station's consumer advocate when a person paid his rent with a check and the landlord claimed he had lost it and asked for another one. The consumer stopped payment on the first check and wrote a second one, only to have the original check cashed 18 months after it had been written.

"As a bank, you have to honor checks that don't have a stop payment on them," he says. "If you think a bad person has your check, someone who understands banking law, you would need to renew it."

Consider a card
One way to avoid stop payments at all is to use credit cards whenever possible, says Dr. Kenneth Thomas, a banking expert and author of The CRA Handbook.

"Once you stop payment, you have to wait seven days to issue a new check; it's a big pain," he says. "It's much easier to use a credit card. It's good when a bill is debatable -- they put a hold on it and they're fighting my battle for me. They have to show proof it's a legitimate charge. I use checks as a last resort. If you're going to pay a plumber or a roofer for $300, $400, you might as well give them cash because you won't get satisfaction in small claims court."

If you do need to stop payment on a check, it's important to hang on to the request form. With that, Inman says you can require the bank to reimburse your account don't stop the check but go ahead and make the payment.

As for the cost associated with the service, Inman says the fees are set where they are for two reasons.

"There are efforts required to get the written notification in, keeping it on file, and the time with the customer service representative," he says. "The other reason is competitiveness. If everyone else is charging $24, so can you. We charge $28."

That said, Leech pointed out that the fee for a stop-payment is a reminder of the value of shopping around.

"It all comes back to, as consumers, we have to comparison shop," she says. "Some of the worst fees are for bounced checks and those kinds of things. We never plan to do those, but in reality, occasionally they happen."

Pat Curry is a freelance writer based in Georgia

--Posted: Oct. 13, 2000