Can I Cash a Substitute Check?

Sometimes the check you receive might not be the original paper document, but rather a “substitute check.” This article explains what a substitute check is and provides guidance on how to cash one.

What is a Substitute Check

A substitute check is a paper reproduction of an original check. These reproductions were made legally valid under the Check Clearing for the 21st Century Act, commonly known as the Check 21 Act. This federal law was enacted to streamline the check processing system by allowing banks to handle check information electronically, reducing the need to physically transport original paper checks.

To be legally equivalent to the original, a substitute check must accurately represent all information from the original check. It also must bear a specific legend stating, “This is a legal copy of your check. You can use it the same way you would use the original check.” A substitute check includes the Magnetic Ink Character Recognition (MICR) line from the original.

How to Cash a Substitute Check

Cashing a substitute check generally follows the same procedure as cashing an original paper check. You will need to endorse the check by signing the back of it.

When presenting the check, financial institutions will require valid identification. Commonly accepted forms of identification include a government-issued photo ID such as a driver’s license, a state-issued identification card, a military ID, or a passport.

You have several options for where to cash a substitute check. Your own bank or credit union is often the most convenient choice, as they typically cash checks for account holders without charging a fee. If you do not have an account at the bank on which the check is drawn, that bank may still cash it for you, but they are not obligated to do so and might charge a non-customer fee, which can range from a flat fee of $8 to a percentage of the check’s value, such as 1% to 2.5%. Additionally, many large retailers and dedicated check-cashing services offer this service for a fee, which varies by provider and check amount. For instance, some retailers might charge a flat fee of $4 for checks up to $1,000, or a percentage of the check amount.

Important Considerations for Cashing

When cashing a substitute check, financial institutions may take additional steps to verify its authenticity due to its nature as a reproduction. This verification process can sometimes lead to slightly longer processing times than with original checks. While the Check 21 Act was designed to expedite check processing, standard bank hold policies for deposited funds still apply.

Funds availability for deposited checks is governed by federal regulations, with initial amounts typically available within one business day, and the remainder within two business days. However, banks can place extended holds on funds for various reasons, such as large deposit amounts exceeding $5,525, newly opened accounts (generally less than 30 days old), or if the account has a history of being overdrawn. These extended holds can range from five to nine business days or more, and banks are required to disclose their specific hold policies to customers.

Ensuring the legibility of the substitute check is important for smooth processing; any poor image quality could potentially cause issues. Vigilance against fraud is also advisable, as with any financial instrument, and you should be aware of common indicators of fraudulent checks like unusual print quality or altered information. The Check 21 Act includes consumer protections, such as a special refund procedure if you suffer a loss directly related to receiving a substitute check that is not legally proper. Maintaining a personal record or copy of the substitute check is a good practice, as it serves as legal proof of payment. If any difficulties arise during the cashing process, contacting the bank that issued the check or the party who provided it is the appropriate first step.