What Is a Stop Payment and How Does It Work?
Understand what a stop payment is, why you might need one, and how to navigate the process to control your financial transactions.
A stop payment is a directive issued to a financial institution by an account holder to prevent the payment of a check or an electronic transaction that has not yet cleared. This service allows individuals to halt a previously authorized or initiated payment. Its general purpose is to protect account holders from financial loss due to errors, fraud, or disputes, ensuring funds remain within their control.
Understanding Stop Payments
A stop payment order serves as a formal instruction to your bank or credit union to decline a specific payment request that is presented against your account. Individuals initiate these orders for reasons such as a lost or stolen check, an unauthorized transaction, or a dispute over goods or services. The ability to stop a payment provides a protective measure, allowing account holders to mitigate potential financial harm.
Payments that can be stopped include paper checks and Automated Clearing House (ACH) debits. A paper check stop payment prevents the specific check from being honored when it is presented for collection. ACH debits, which are electronic payments commonly used for recurring bills or direct withdrawals by merchants, can also be stopped. This distinction is important because the rules and procedures for stopping an ACH debit may differ from those for a paper check.
Requesting a Stop Payment
Before initiating a stop payment request, individuals must gather specific details about the transaction. For a paper check, this typically includes the exact check number, the date the check was written, the name of the payee, and the precise amount of the check. This information helps the financial institution accurately identify and prevent the payment.
For an ACH debit, the required information is slightly different. You will generally need the name of the merchant or originator of the debit, the transaction date, and the exact amount of the payment. If the ACH debit is recurring, such as a monthly utility bill, you might also need to provide details about the authorization you gave for these payments. Requests can be made by phone, through online banking portals, or in person at a branch.
After Your Stop Payment Request
Once a stop payment request is submitted, your financial institution will provide confirmation. This confirmation might be a reference number, an email, or a mailed notice, signifying the order has been placed on your account. Retain this confirmation for your records.
Financial institutions charge a fee for processing stop payment orders, ranging from $20 to $35 per request. The duration a stop payment order remains active varies by payment type. For paper checks, it is often effective for six months, while for recurring ACH debits, it can remain in effect indefinitely if the original authorization is also revoked. A stop payment order can only prevent payments that have not yet cleared your account; if a transaction has already been processed and the funds disbursed, the stop payment will not reverse the payment.