Not necessarily, if you’re writing postdated checks in good faith. When writing out paper checks, there are several key pieces of information to include. Along with the payee’s name and amount, you’ll also need to add the date the check was written. If you’d like the person receiving the check to wait until a certain date to cash or deposit it, you could postdate it.
As you can see in the image of a sample cheque above, several blanks need to be filled in before you send the cheque to be honoured by the bank. Now we know the definition of cheque, let’s understand post-dated cheque. However, there are instances that you can get in trouble for writing a worthless check. Your August 1st posted check will be cashable as of August 1st, and so on.
Post-dated Cheque – Definition, Validity and How to Write it
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 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. You could, however, get into trouble with the bank if you’re writing postdated checks that you know you can’t cover.
How far out you push the date can depend on what the check is for and your reasons for postdating it. If you have taken a short-term loan from the bank, they might want to guarantee their future payments, so they might ask for post-dated cheques. As the post-dated cheque rules, the validity of a post-dated check in India is three months.
- It’s not their fault, though, as digital payments are the most popular method of payment in this age of technology due to which cheques are used quite less for a deposit or withdrawal of money.
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- Now we know the definition of cheque, let’s understand post-dated cheque.
- Your August 1st posted check will be cashable as of August 1st, and so on.
This provides a means for individuals and businesses to manage payments, plan finances, and create agreements with a deferred execution date. By giving post dated checks, you are giving your landlord the comfort that he or she has the potential payment of your rent. You may choose to give your landlord twelve post dated checks covering your rent for the next twelve months. Keep in mind that waiting to cash a postdated check still won’t guarantee that they’ll have the money to cover it. Say your roommate writes you a postdated check for their half of the rent because they’re expecting to get paid by a certain date.
What is a post-dated cheque?
The cheques cannot be honoured by the banks before the date mentioned on the cheque. The last alternative to providing a post dated check is the good old hard cash payment. In this case, you’ll write a post dated check for $500 by putting a date after the date you’re expecting to be paid. For example, if you want to pay your friend $100 only as of next week, you can write a post dated check for $100 bearing next week’s date. Let’s look at an example to see how post dated checks are used in practice.
Validity of a post-dated cheque
But in some cases, the payer may provide the payee with a postdated payment. This means that the instrument used to make the payment is dated for a specific date in the future. This can be done using several payment methods, including checks. 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. You’re writing a check to your landlord, but you don’t have enough money in your account.
Use cases of Post-dated cheques
Section of the Uniform Commercial Code states that a bank may charge against the account of a customer an item that is properly payable from that account. If that’s the case, you’ll need to contact your bank to specifically inform them not to cash the check until the date appearing on the check. The person receiving your check will not be able to cash your check until the day that is indicated on the check. For example, you may want to purchase something for $500 but you only have $300 in your bank account.
Otherwise, your check will “bounce” and the landlord will receive an “NSF” or “Not Sufficient Funds” notice. 2) the reverse, in which a person is promised goods or services but does not receive them and has to stop the cheque. From the perspective of the payer, the best way to ensure that funds are not released early is to notify the bank not to release funds against this check any earlier than the date stated on the check. From the perspective of the check issuer, there should be no journal entry to record the reduction in cash until the date listed on the check. From the perspective of the recipient, there should be no entry to record the increase in cash until the date listed on the check. Thus, the date on the check effectively postpones the underlying accounting transaction.
The national bank of India, RBI (Reserve Bank of India), has reduced the validity period of all cheques from the previous 6 months to 3 months, effective April 1, 2012. It won’t be wrong to say that virtually everyone knows what a cheque rfid proximity & ble smart card readers is, except for millennials perhaps. It’s not their fault, though, as digital payments are the most popular method of payment in this age of technology due to which cheques are used quite less for a deposit or withdrawal of money.