Sunday, April 5, 2009

Check Verification vs Check Guarantee

If you accept ACH, echecks or just plain old paper checks you probably use either a check verification service or a check guarantee service. These services are designed to reduce your company's exposure to bad checks.

Check Guarantee
If one of the checks you accept results in an NSF (Non Sufficient Funds) the check guarantee company will reimburse you depending on if the check was accepting according to the guidelines they provide. These guidelines cover whether the writers drivers license is on the back of the check etc. By not following these guidelines the check guarantee company may refuse to pay. Even if they do pay they have the option to debit your account later if they cannot collect from the bad check writer. The fees check guarantee companies charge are pretty steep for the average merchant.

Check Verification
This method of check protection gives you the option to decline or accept a check during the payment process depending on the information and data provided. Verification can be done at checkout. A real-time query is made to check the status of the account. A number of items can be checked.
  • Is the account in good standing
  • Has the account been stolen or a victim of fruad
  • Is the account a non DDA account
  • Are there sufficient funds to cover the check
  • Is the account in NSF
  • Is the routing number and account number valid
  • Is there a stop payment on the account

Another optional item would be to have the check ran through a database of known bad check writers.

Compared to check guarantee, check verification is far less expensive.

Some service providers may not be able to offer the entire list above for check verification and may just offer the negative database. In that situation you may want to look at another service provider to get the full benefit of check verification.

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