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What is Check Verification?
Home » Accounting » Check Verification » What is Check Verification?When customers pay by check, a company generally has little protection against bad checks. Unlike credit card payments, which are guaranteed by the credit card company, companies that receive checks may or may not get their money. That’s where Check Verification systems come in. A check verification company provides an electronic database of people who have written ad checks or have had their banks closed due to bad check writing. And some companies, check guarantee agencies, reimburse the company if the check bounces. This service costs more.
How a check verification service works: On the consumer end, you’ll see a retail clerk run your check through an electronic reader and enter the checking account number or your driver’s license number into a terminal. The check verification company then sends back approval or denial of the check in question. The retail clerk then continues the transaction, if approved, or returns the check to the customer and asks for alternative payment, if denied.
The check verification company is looking, on its end, for an account that actually exists and is open, and one that has a positive balance. If the company finds a closed, or frozen, account, it denies the check. The check verification company does not, however, tell you how much is in the customer’s account; it can only tell you that the account is positive, and is not a closed or negative account.
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