What Is a Postdated Check & How Do They Work?

Postdated checks are a financial tool sometimes used to manage future payments, though their functionality may not always align with common assumptions. This article explores how financial institutions handle them, common scenarios for their use, and the process to stop their payment.

Understanding Postdated Checks

A postdated check is a check written with a future date. The intention is often to delay its cashing or deposit until the specified future date, perhaps to align with an anticipated income stream. For example, an individual might write a check on a Wednesday, postdating it to Friday, anticipating their payday.

Despite the future date, a check becomes a valid negotiable instrument the moment it is written and delivered, meaning a bank can process it before the indicated date. The Uniform Commercial Code (UCC), which governs such instruments, treats checks as payable on demand, regardless of a future date. It is important for the check writer to ensure sufficient funds are available in their account on the date the check is issued, as the future date on the check does not guarantee delayed processing.

How Banks Process Postdated Checks

Financial institutions operate under the Uniform Commercial Code (UCC), which permits a bank to pay a check even if it is presented before its stated date. This is because automated check processing systems typically do not verify the date, or a teller may not notice the postdating. Banks are generally not liable for cashing a postdated check early unless the drawer (the person who wrote the check) has provided specific, timely notification of the postdating.

For a bank to be obligated to delay payment, the drawer must notify the bank in writing, describing the check with reasonable certainty, and provide sufficient time for the bank to act on the request. If a postdated check is presented early and the account has insufficient funds, it may “bounce,” leading to non-sufficient funds (NSF) fees for the check writer, typically averaging around $35. If the bank pays a postdated check early despite receiving proper notification not to, it may be liable for any losses incurred by the customer, including associated fees.

Situations Where Postdated Checks Are Used

Individuals and businesses sometimes use postdated checks, though modern electronic payment methods offer more reliability for scheduling. One common use is to delay a payment until a specific future date, often to align with an expected income or cash flow. This can be particularly relevant for managing personal finances or business liabilities.

Postdated checks might also be used as a form of security or assurance for a future transaction. While less common now due to electronic transfers, they were historically used for installment payments, where a series of checks would be provided to cover future obligations. A postdated check could also be issued for services rendered on a future date, ensuring payment aligns with the completion of work.

Canceling a Postdated Check

If a postdated check needs to be canceled, the primary method is to issue a stop payment order with your bank. This order instructs the bank not to honor the check if it is presented for payment. The request must be timely.

To initiate a stop payment, you typically need to contact your bank and provide specific details about the check, including the check number, the date it was written, the payee’s name, and the exact amount. While an initial request can often be made verbally, many banks require written confirmation within a specified period for the order to remain effective. Banks generally charge a fee for this service, which can range from approximately $15 to $35. A stop payment order on a paper check typically remains in effect for six months.