I don't know a lot about paper checks because I have never seen one, and I don't live in America.

Suppose person A gives person B a check for $100,000 in payment for something in a shop. How can B be sure that A has enough money in the bank account to cover the check amount, and is not scamming?

How is this known now, and how was it known before use of computers in banking?


16 Answers 16


The bottom line is you don't.

Checks are rarely written for that amount, currently the average checking balance in the US today is around $6,000 or so. Traditionally, checks were written for much smaller amounts. Perhaps $200 at the grocery store, $100 at the restaurants, $50 at other merchants.

Many business would black list those that wrote bad checks.

Checks have decreased in frequency because of problems for both sides of the transaction.

However, in larger transactions one can have a "guaranteed" checks, often known as a bank, cashier's, or teller check. In that case the bank would withdraw the money ahead of time from the payor, issue a check, and that payor could then give the check to the payee. Those kinds of transactions happen with home purchases and the like.

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    I would also add that writing a bad check is a crime, potentially a felony depending on the frequency or the amount, and is, in essence, nothing other than stealing
    – Kevin
    Commented May 30, 2018 at 12:36
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    Comments are not for extended discussion; this conversation has been moved to chat. Commented May 30, 2018 at 22:13
  • Would changing the answer to say "average checking account balance" be wrong, per US terminology? (Or better yet adding a parenthesis saying what a checking account is!)
    – gsnedders
    Commented Jun 1, 2018 at 0:57
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    @BillK there is no reason, including wealthy people, to have much in checking. Why keep money in checking and earning next to nothing when one can earn a decent rate in an online savings account, and can be transferred in 24 hours?
    – Pete B.
    Commented Jun 1, 2018 at 18:02
  • @PeteB are you saying you think the average of 6000 is wrong, or that there is another explanation for it?
    – Bill K
    Commented Jun 1, 2018 at 19:52

In the UK, in the 1980s, if you wrote a cheque to the seller of an item and didn't have the money in your account, the bank would bounce the cheque (and charge you a fee) but the seller would have lost their money and their item.

To give slightly more protection to the seller we had the concept of a "cheque guarantee card" - which looked like an ATM card (and was often the same actual physical card once ATMs became a thing) and the seller would ask to see your card, typically for purchases up to £50 or £100 (depending on the amount specified by the card). They would then write your card details on the back of the cheque and also your address. If you paid for something with a cheque and gave the seller your cheque card details, the bank would honour the cheque even if your account couldn't cover it (protecting the seller), and then pursue you for the money if you didn't have enough.

The "bank cheque" or "cashier's cheque" mentioned in the earlier answer https://money.stackexchange.com/a/95893/739 is one further step up in protection for the seller.

There is a good overview of the history of payment cards in the UK at http://www.theukcardsassociation.org.uk/history_of_cards/index.asp, specifically see:

UK domestic cheque guarantee scheme is established.
£100 and £250 UK cheque guarantee limits introduced.

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    Just to add to this, I remember having these cards at least into the early 2000s, and I always knew them as cheque guarantee cards (I never heard them referred to as merely cheque cards - perhaps this was a regional thing).
    – JBentley
    Commented May 31, 2018 at 5:25
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    – JCRM
    Commented May 31, 2018 at 5:42
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    As a shopper in the UK in the 70s and 80s, I remember this process well. About the address; your address wasn't on the cheque guarantee card. The shop could ask you to put your address on the back of the cheque. You could comply - using your real address, or a phony address, or you could refuse, in which case the shop could refuse the sale, or back down and accept the unaddressed cheque. The whole thing was a mess. I'm amazed cheques are still a thing in the US shopping environment. Commented May 31, 2018 at 6:37
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    @Cloud what? We're talking about the 1970s and 1980s here, way before contactless (or even debit cards) was a thing.
    – Vicky
    Commented Jun 1, 2018 at 9:55
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    @Cloud, Contactless in the UK came in in 2007.
    – Vicky
    Commented Jun 1, 2018 at 10:56

It was also common to call the bank and ask if funds were available.

It was legitimate to call the number printed on the front of the check and say, "Hi, I have this check for $300 from Artem, account number 1139391874. Is it good?"

The bank would either verify funds or say that no, that check would bounce.

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    It was also common to ask for ID (drivers license) before accepting a check and write down the DL#. Also to not accept out-of-town checks, and to not accept checks with low numbers (indicating a recently opened account). That last was a really imperfect measure since you could always just order checks starting with whatever number you wanted.
    – The Photon
    Commented May 30, 2018 at 16:47
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    However this "call for verification" technique was very vulnerable to a "double-spend attack". You could have $200 in the bank and spend that $200 multiple times in the day... each time a merchant called that day, the $200 would still be there.
    – Bart
    Commented May 30, 2018 at 18:34
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    I did something this when working in a small business - when we got back official copies of returned checks, I would go to the issuing bank (usually the same as the business's bank) and ask if the account had funds before attempting to deposit it again. We still had to go after the writer for the fees but at least we were able to get the amount of the check as soon as they had funds in their account again. Commented May 30, 2018 at 19:28
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    @ThePhoton The whole "out of town cheque" thing always seems weird to Europeans, where essentially all banks are regional or, more likely, national in scale and have been for decades. Commented May 31, 2018 at 17:24
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    @DavidRicherby, note that "national" in a European sense is (very roughly) around the size of "state" in an American sense. American businesses tend to be wary of out-of-state checks.
    – Joe
    Commented May 31, 2018 at 20:49

In addition to the other answers, there were people that relied on the delay of cheque settlement - you could make a purchase with cheque on Thursday, get paid in cash on Friday, put the money in the bank and it would cover the cheque next week when it cleared.

It was also possible to "post-date" cheques, with a date in the future. This was supposed to defer it until that date, but this wasn't something that banks would always honour.

For very large payments, there are "banker's drafts", which are pre-cleared. The bank effectively takes the money out of the sender's account on issuing the cheque.

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    While post-dating cheques was relatively well known and common - it was never legally protected in any form as the date on it was supposed to be the date you signed it - and there was never any onus on the bank (or receiver of the cheque) to hold payment until that date.
    – Rycochet
    Commented May 31, 2018 at 9:21
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    Post-dating never actually meant anything. A singned cheque is valid immediately and ceases to be valid six months (in the UK, at least) from the date on it. So writing a cheque dated, say, a month in the future just allows the recipient seven months to cash it instead of six. Commented May 31, 2018 at 17:27
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    Post-dating has always been more of an "honor system" thing. It's just a way of letting the recipient know that if he cashes the check too soon it will probably bounce and he won't get his money.
    – Barmar
    Commented Jun 1, 2018 at 0:21
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    Post-dating a cheque in Canada seems to be 'legally' binding as in the banks agreed to rules that don't allow them to pay out the funds before the date specified on the cheque. If they do, the cheque writer can ask for the money back en.wikipedia.org/wiki/Post-dated_cheque#Canada Commented Jun 1, 2018 at 13:28
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    Simply post-dating the check may not be effective, but checks can be marked with additional disbursement requirements. "Void after" is the most common that I've seen, followed by "deposit only" and "endorsement required". "Not valid until" would likely be honored as long as the processing system noticed the irregularity, but banks tend to start charging the check writer extra fees when a human being has to actually look at it.
    – Perkins
    Commented Jun 4, 2018 at 20:27

Lots of answers, but none that focuses on the example presented by the original poster:

Suppose there is person A who gives another person B a check for $100,000 in exchange for something expensive in a shop. How can B be sure that A has the money and it's not a scam?

If someone gave me a check for $100,000—nowadays or in the past—I would hold onto the item they are paying for until that $100,000 check has cleared. No exceptions.

Anyone spending $100,000 much who wants something “Now!” yet they cannot provide cash, credit or a cashier’s check (bank check) is attempting to scam someone. Or they are insane; same difference as far as my personal liability goes.

And based on that fact, you need to understand where credit comes from: Reputation. If you have a solid financial record and have little to no debt, guess what? You have good credit! The fact you pay your debts is the reason a company will then allow you to purchase things on credit.

Now if you are a small merchant? Others have discussed this, but unless you are really hard up for cash, you will not risk bouncing checks for small amounts. The long term damage to your financial stability is much more risky than the amount you might be able to “con” away from a scam like this.

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    The check can "clear" and still bounce later. For example, a cashier's check will typically clear overnight, but if if it's counterfeit, the bank it was purportedly issued against can still refuse to pay it. Commented Jun 3, 2018 at 20:43

The simple answer is that you don't know that you'd get paid, just as you don't know that you won't get mugged and have your cash stolen, or have someone steal your credit card and run up a bunch of charges. But all these things are crimes (in the US, at least), and someone who does them faces the prospect of fines and possible prison time. (With checks, if it's just accidental, you'd only get a significant "bad check" fee from your bank...) As others have mentioned, for large sums there are things like cashiers' checks that are guaranteed. Though people do occasionally write fairly large personal checks, e.g. this one for a divorce settlement: http://money.cnn.com/2015/01/09/luxury/billionaire-divorce-check-cashed/index.html

Really, it just comes down to the fact that most people are fairly honest - either inherently, or because they recognize the consequences of dishonesty. Credit cards really aren't much different: I could easily run up $100K or so in credit card purchases, then just not bother to pay the bills. Though I think it would be the card issuer that would suffer the loss, not the merchant.

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    I'd venture that credit cards are a bit different - If you write a bunch of bouncy cheques, you have several small shop owners and restaurant managers chasing you for minor amounts of money. Chances are most will write it off. If you run up a credit card bill and don't pay, the merchants are all refunded but you now have a single, large credit card firm, with a specialised debt-recovery department on your tail. Commented May 31, 2018 at 6:43
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    @Oscar Bravo: OTOH, if you write a bunch of bouncing checks, you're likely to have your local police department on your tail :-) E.g. washoecounty.us/da/Departments/fraudcheck.php
    – jamesqf
    Commented May 31, 2018 at 17:27
  • And it should be noted that the credit card fees the shop owner has to pay can easily be far higher than his losses from people simply not paying for what they buy. It's like really expensive insurance, and your premium increases if your customers cheat too often anyway.
    – Luaan
    Commented Jun 6, 2018 at 8:20
  • Also, if someone steals your CC (or its information) and runs up a bunch of charges on it, you can contact the issuing bank, explain that the charges were unauthorised, and have them reverse the charges (and brick the card, if necessary).
    – Vikki
    Commented Jun 8, 2018 at 13:54
  • @Sean: But that just passes the cost of the bad charges on to the credit card issuer, which has built them into is overhead, so everyone who uses or accepts the card pays part of the cost.
    – jamesqf
    Commented Jun 8, 2018 at 18:06

There are still countries using cheques today; they are still common in France for example, and every time I've gone to the supermarket there I've seen people (generally older) using cheques to pay.

There is generally no guarantee for the vendor, when paid with a cheque, thought they have a few recourses:

  1. It is illegal to pay with a cheque without having the money, so the law is on the vendor's side and they can recover it (though at some cost).
  2. Banks have no obligation to issue cheque books to their clients, so clients whose cheques are bounced too many times will not be issued cheque books any longer.
  3. In France at least, vendors will usually ask for 1 or 2 forms of ID, which they check against the cheque, and write the details at the back of the cheque to protect against fraud claims (my cheque holder was stolen!).
  4. For larger amounts (> 1,000 €), cheques are refused.

I would note that cash has similar issues (counterfeit money), yet is still accepted in most places. And while credit cards are more secure, they incur vendor fees.

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    4: Checks may not be refused, but the item will not be released before the check clears, which can take a week or two ;) So you can pay a new car by check, just do not expect to get posession of it immediately.
    – TomTom
    Commented May 31, 2018 at 8:33
  • I would disagree about credit cards being more secure. Perhaps for the vendor, but they open up whole new avenues for fraud. basically most of what's miscalled "identity theft".
    – jamesqf
    Commented May 31, 2018 at 17:46
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    @jamesqf Actually, credit cards provide a lot of protection for account owners - they are almost never liable for the fraud if they respond in a reasonable time. Frank Abagnale was mentioned above - he said in a 2017 talk at Google that he only carries a credit card for personal use, and never a debit card, because of the protection it provides.
    – brichins
    Commented May 31, 2018 at 19:24
  • Did you mean "clients whose cheques are bounced too many times will not be issued cheques any longer"? Not sure how relevant it would be if they have something to put it in. In any case, #2 probably has not been useful for a long time, at least as long as you have been able to purchase checks from anywhere besides your bank.
    – user12515
    Commented May 31, 2018 at 22:20
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    @Michael: Sorry, bad translation. I meant "cheque books". Commented Jun 1, 2018 at 6:36

Law, particularly criminal law

Bouncing a check is a crime. When buying merchandise at retail, the retailer will swear out a complaint! Even for a little one, lest word get around that they don't enforce. First time, a cop will call you and say "settle this today or else". Third time, they won't call, they will put out a warrant and you are a fugitive. You are going to jail.

That... Is why the retailer wanted your driver license number. So he could put it on the police blotter.

If you're thinking "my atm card declines all the time, I'd bounce checks that often!" No. The checkbook has a check register where you log each check, debit and deposit, so you always knew what you had. Auto-debits didn't exist, so they weren't throwing grenades into your checkbook.

If you bounced one, the bank would call, you'd contact the seller and got in front of it. It's what you did.

Also in my day, 95% of checks were to pay mailed bills like the electric bill, where you already have a limited line of credit. In those cases, they choose not to treat it as a crime, just a failed payment. Make another payment by the due date, you are golden except for the bounced check fee. Otherwise the normal late fee also applies.

Don't underestimate the importance of the fact that check law has been maturing for 200 years. The law ( police, courts, civil litigation ) know exactly what to do with paper check fraud of every kind. They've seen it all. They know when it's a crime, who to blame, and who carries liability. In particular, hundreds of years of case law - it's unlikely for any "new case law" to be developed around paper checks simply because everything that could happen has happened. Contrast to electronic payments case law, which is only now starting to be written, and things like Experi-Metal v. Comerica can suddenly change the game.

Know Your Customer

The world was a bit smaller and most check transactions were small and/or with "regulars" - people the retailers knew. And retailers sized up whether they'd take a check on that basis. Wasn't always fair.

But yeah. We have taken 5 digit checks from people we knew, and knew the transaction was typical for them. Springfield ISD wants another $50k of Macs, okay... Green Hills Country Club, no way.

  • "The checkbook has a check register where you log each check, debit and deposit, so you always knew what you had." Assuming, of course, that you never made a mistake somewhere along in the plethora of additions and subtractions...
    – Vikki
    Commented Jun 8, 2018 at 13:57
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    @Sean that leads to the other ritual of owning a checkbook, the monthly reconcile against the mailed bank statement; or simply asking a teller if there's any reason to doubt. I've never made a math mistake over $100; I know people make mistakes with abstract, meaningless math in school, but this is your money. When your money is at stake, nobody makes a mistake like $8861.55 - 431.14 = 4550.51... when half your money evaporates, you notice. Commented Jun 8, 2018 at 14:04
  • ...which means that, if you do make a mistake, you have up to a whole month before going "hey, why are the chequebook and the statement $95.31 off from each other?".
    – Vikki
    Commented Jun 8, 2018 at 14:13
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    @Sean correct, but infrequent. And far above carrying around rubberbands of banknotes and gasp mailing them. But even then, a checkbook gave you something just unavailable in the modern e-debit world: actual responsibility for your money. You knew every cash in and cash out because it flowed from your pen. You had actual control of your money, not just a bunch of automatic systems whizzing money every which way. You were the driver of your checking account not the passenger. Commented Jun 8, 2018 at 14:30

There were many ways, but in the end, you don't actually know.

  • List of bad accounts - Most people that accepted checks also had a system to check for a list of known bad accounts. You could get banned from using checks, or even banned from ever shopping at that store again, should you write a bad check. Once you have written a bad check it can be hard to get your checks accepted. As this list grew more and more companies used it, until writing a bad check at the tire shop could me not being able to use checks at the grocery store. An example is the "ChexSystems" reporting system: See Check First.
  • Calling the bank. To this day, you can call a bank with an account number and ask if that person has enough to cover X amount of money. So you would Call "Does Bill Smith, account number 1234567 have $400 to cover this check"
  • Honor System. To be frank, people were just more honorable and accountable. You wrote a bad check at your local diner then you would have to face the waitress you stiffed next time you went. It was not ok to write bad checks. At least around here the "you owe me" and "let's screw the "man"" sensibilities are very new. More and more this is, IMO tied to the decline of small business. You didn't write a bad check at the produce stand because you didn't want them writing bad checks at your tire shop.
  • Legal action. Writing a bad check can be a criminal offense. And it can often time trigger odd consequences. All of the sudden that bad check at the car shop is now a federal crime because the home office of the shop and your bank are in different states. Many states have laws like "After 30 days you get twice the amount of the check plus attorney fees" That could make your $45 bounced check have you in debt for thousands. In FL for example you could get 5 years in jail.
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    Regarding the Honor System, I think the point is actually the word "local". In a small community, word of mouth and reputation can indeed be a potent force.
    – MauganRa
    Commented Jun 4, 2018 at 11:45
  • I thought the reason cheque fraud was a federal crime was that banks were federally-insured institutions?
    – Vikki
    Commented Jun 8, 2018 at 13:59

You said "without computers", but the general case with them is still interesting.

In the US, since 2004, there is a system called Check 21 that allows businesses (and maybe individuals?) to scan and instantly process checks, in much the same way that debit transactions are processed. This alleviates most, but not all, of the types of issues you are worried about.


UK: Our window cleaner still gets a cheque. He doesn’t know if we have the money, but he knows where we live.


In Germany, cheques were usually guaranteed by the bank up to 400 DM per cheque. Cheques fell out of use around 2000.

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    If I remember it correctly (I was very young back then), that guarantee worked only in combination with a "cheque guarantee card", like Vicky mentioned it in their answer.
    – mastov
    Commented May 31, 2018 at 10:43

For transactions involving transfer of valuable assets and a lot of money, such as real estate, a process known as "escrow" is used. Escrow is a process where a disinterested third party, who is paid for their services, collects all the documentation and money from both the buyer and the seller, holds it until it's shown that everything necessary has been delivered, signed, etc, and then delivers the money to the seller, gives the deed and any other necessary documentation to the buyer, notifies the governmental agency which records property transfers, etc, etc, so that the property is properly transferred, the seller is paid, and so forth. When it comes to transactions such as these there is actually very little "trust" involved - the escrow process which has been developed over many, many years has replaced "trust" with procedures which are intended to guarantee that the transaction is completed properly.


How did people deal with checks before computers and other things that made it easier to verify?

The same way they handled the precursors to checks, which were promises to pay. Kind of like running a tab at the bar, that privilege is reserved for trusted parties or those so well known that the hit to their reputation would be more damaging financially than the amount being floated.

Imagine you live in a area where everyone knows where everyone else lives. We know your address, what job you have, and roughly how well you're doing financially. There's no such thing as checks. You stop by the store, want to purchase some items and won't be coming into "town" for another week, but aren't carrying negotiable instruments with you and don't have the time to get them for the purchase now. What happens? Well, if you're well known, with strong ties to the community, and have been honest in your dealings in the past, and the store can tolerate not having payment for a week or two, the store may decide to record your debt in their books with the expectation that you'd pay it later. If you didn't pay, you may expect a visit later from the authorities or you'd find yourself blacklisted not only from the merchant you stiffed, but using such services at a wide range of other merchants.

So, given that you need to live and trade with these people, you are established in the community, moving somewhere new would be problematic, not to mention much more expensive than whatever it was you wanted to buy, why would you skip out on the debt? Or even take it on if you had a strong likelihood of not being able to cover it?

But this system is problematic. It requires you to physically come back to the town with the money (potentially dangerous) or go to the bank, withdraw the funds, then pay the merchant (time consuming). And the merchant is essentially giving everyone who takes advantage of this an interest free short term loan (not necessarily good business).

The next month, the banks announce a new innovation - the "check". Which is now a piece of paper that when presented to the bank, results in a transfer of funds from the payer's account to the payee's. This reduces the amount of time the merchant needs to float funds from days/weeks/more to just business days. This removes the need for the customer to return to town, which saves them time. But it changes nothing else. You still only conduct such transactions with people you trust or people you can leverage into paying up.

If anything, the ability to defer trust to an electronic system is likely what enabled even more fraud. Since you don't need to exploit personal connections and trust, the threshold to scam someone is much lower.

So, TLDR - this worked due to tight communities and some amount of trust which predates the invention of checks. For you to pass a fake check, you needed to be able to execute a confidence scam - convincing someone you were trustworthy or person of importance/reputation, or convince someone who already has those qualities to either vouch for you or put up their own money while accepting your worthless check.

  • +1, though I'd caveat that there is a distinct advantage to the merchant of giving customers an interest free loan: It encourages business. If you use a credit card, the clearing house charges the store a fee, typically around 2 or 3%. So why should the store accept a credit card and pay this fee rather than demanding that all customers pay cash? Because they know that people are more likely to buy if they have the convenience of using a credit card.
    – Jay
    Commented Jun 2, 2018 at 20:03
  • @Jay It's worth noting that for most businesses running with cash isn't free either (you have the cost and inconvenience of running a float, cashing up, etc, while making yourself a tempting target for robbery or employee theft).
    – origimbo
    Commented Jun 4, 2018 at 14:23
  • @origimbo Sure. I used to be treasurer for a non-profit organization. I remember once going to the bank with $30,000 in cash and checks in my briefcase, and as I walked across the parking lot, I thought to myself, this would be a really bad time to get mugged.
    – Jay
    Commented Jun 4, 2018 at 14:33
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    In places such as farming communities, where cash was a scarce commodity that was available only every few months when something was harvested, stores had to carry customer accounts "on their books" or they'd have no business. My daughter found an old ledger-book from the store run by my wife's great-to-the-Nth-grandparents, and it's kind of interesting to go through and see each purchase recorded neatly, along with the running balance for that customer. Every once in a while someone would come in to pay off their balance, and then there'd be a notation with a zero balance. Happy day! :-) Commented Jun 8, 2018 at 14:35

You Don't

A personal check can be cashed for up to the amount written on it (so in your example, if the writer of the check had $4,000, you could clean out their account by cashing it, but would not be able to get more than that), but generally speaking, if a check is written for more than the writer has in the account, upon cashing it will 'bounce' and the person cashing the check will not receive anything.

Bouncing a check usually carries a penalty or fee as well as potentially earning yourself a blacklist from certain shops (I falsely assumed that bouncing a check would also hurt your credit, but @ThePhoton set me straight). As an individual receiving a check from another individual, you are essentially out the money, and will have to take legal action to recoup either the money or the item you sold.

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    Bouncing a cheque is also a criminal offence in some jurisdictions, which is a further deterrent to writing bad cheques.
    – Mike Scott
    Commented May 30, 2018 at 11:59
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    Bounced checks aren't considered by the major credit bureaus for determining credit score in the US. They are tracked separately by a different company, ChexSystems.
    – The Photon
    Commented May 30, 2018 at 16:50
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    @ThePhoton Thanks for the heads up, I'll edit that in
    – GOATNine
    Commented May 30, 2018 at 16:54
  • The law around checks goes back hundreds of years. Bouncing a check is itself a crime (misdemeanor meaning jail time is on the table) and the underlying intention to defraud is also a misdemeanor or felony (jail time probably). Crimes the DA will be happy to overlook if it looks, walks and quacks like a plain error, as indicated by bouncer reaching out to the merchant to square things. Commented Jun 8, 2018 at 14:51

As already stated, you don't know in advance if a cheque will clear - it is a paper promise to pay, and is only as good a promise as the customer's word. Vendors will more readily accept cheques when the vendor has recourse of some kind - the goods sold can be readily repossessed (like a car), the tenant can be evicted (apartment etc. rentals), a lien can be placed on the customer's home or car (repairs, etc.), or there is enough time from payment to delivery to cancel the transaction (such as a deposit on a car purchase). Businesses will also accept personal cheques from customers with whom they have had reason to build trust.

Vendors often refuse personal cheques in situations where there would be significant finanacial exposure. They will usually require cashier's cheques, certified cheques or bank drafts (all amount to the same thing) - placing trust in the issuing bank rather than an individual.

Example: I just sold my car privately - I required the buyer to pay by certified cheque or bank draft before I signed over the ownership and handed him the keys. I would have been foolish to accept a personal cheque.

But... if a family member was giving me money for whatever reason - gift, purchase of something, etc., I would accept a personal cheque because of the trust present in the family relationship.

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