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Post-dated check financial definition of Post-dated check

When you have a postdated check, find out if the check was intentionally postdated and figure out a solution. Section 138 of the Negotiable Instruments Act holds legal standing in legal cases related to post-dated cheques. With the concept of cheques now behind us, it should be much easier to understand the concept of Post-dated Cheques. Here, it is important to note that cheque will be presented to the bank either on the date written on cheque and after the date. Now we know the definition of cheque, let’s understand post-dated cheque.

If you properly provided instructions to your bank and they pay funds from your account anyway, your bank should be required to cover any overdraft charges that result. You may have further recourse against your bank for any other expenses you face. In some cases, postdated checks get deposited, and nobody ever notices (they don’t look closely at the date). Unless there’s a problem or complaint, those checks are processed and forgotten about. While postdating a check won’t guarantee a delay, you can specifically instruct your bank not to cash a certain check until a certain day.

  • It is also illegal to pretend to pay someone without actually intending to do so.
  • Payments may be postdated in a number of circumstances, including if someone sets up a payment arrangement with a creditor or when there are regular monthly payments set to come out of an account.
  • For example, if someone issues the cheque on January 15th, 2021, it will be valid until March 14th, 2021.
  • A Canadian bank, for example, is not supposed to process a post-dated cheque and if it does so by mistake, the cheque writer may ask their bank to correct the error.

This way, your friend will not be able to cash the check at the bank on any day that is prior to the date marked on the check. For example, you can issue a check to your friend for $100 and instead of putting today’s date on the check, you can put next week, next month, or whatever date in the future. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Where a demand for payment of a cheque is made before the date of the cheque arrives, the cheque shall not, by reason of the demand, be taken to have been duly presented for payment.

Use cases of Post-dated cheques

The cheques cannot be honoured by the banks before the date mentioned on the cheque. Sometimes, the alternative doesn’t work, and you choose to issue post-dated cheque(s) assuming the funds will be available on the future date. To make the situation little more interesting, you may have received the post-dated cheques promising to honour the payment on a given date. You might have considered this as well in issuing a post-dated cheque.

From the payer’s standpoint, the best way to prevent payments from being released early is to notify the bank. The only way to guarantee they’ll actually work is to pay extra fees to your bank. If you’re unwilling or unable to pay your bank to monitor your account, you’re at the mercy of whoever you give the check to. Even if your payee is honest, they may make the honest mistake of forgetting (potentially leaving you with bad check fees). Depositing allows your bank to place a hold on the funds while the check clears, but cashing a check requires an immediate transaction.

  • However, they all have clear rules and policies that apply to checks bearing a future date.
  • Dishonoured cheques are punishable with up to a year in prison or the payment of a fine equivalent to twice the amount of the cheque under the terms of section 138 of the NI Act.
  • The reason is that the checks cannot be turned into cash prior to the dates shown on the checks.
  • However, a rejected payment (or an unexpected withdrawal from your checking account) can cause numerous problems.
  • The drawer typically uses a post-dated cheque to postpone the payment to the recipient.

Or an individual may deposit a check through the automated teller machine (ATM). If the check goes through and bounces, the payer may be responsible for an NSF charge. Auditors do not like to see post dated checks, since it implies that the payer is short on cash, and is attempting to pay bills later than it should.

Alternatives to Postdated Checks

The Uniform Commercial Code (UCC) enables lenders to loan money, secured by a borrower’s personal property. Adopted by nearly every state, the UCC is a standard set of business laws that was first published in 1952 to regulate financial contracts. Article 3, Section 113 of the UCC outlines the rules for postdated checks.

In the United States, it is generally legal to issue post dated checks. Another common reason why someone may issue a post dated check is because they do not have enough money in their bank account to cover the amount indicated on the check. By giving post dated checks, you are giving your landlord the comfort that he or she has the potential payment of your rent.

postdated check definition

To define post-dated cheque, it is a form of a cheque drawn with a future date written on it. To simply put, post-dated cheque is one which is drawn with a date which is after the date on which cheque was written. In commercial transactions, banks are also given the right to process a check to the extent it is valid and correctly written. If that’s the case, you’ll need to contact your bank to specifically inform them not to cash the check until the date appearing on the check. Keep in mind that some banks have a policy where they can honor checks that are made out for a future date. For instance, your July 1st post dated check will only be cashable as of July st.

SoFi Checking and Savings

The recipient agrees to such a payment arrangement because it enhances the payment odds. Furthermore, businesses utilize it as a credit risk mitigation in the event of installment payments. On 31st May 2021, the supplier accepted the cheques and agreed to deposit them on the dates mentioned. On 15th June 2021, the beginning inventory definition supplier increased the cash by $2,500 by depositing the first post-dated cheque while reducing the accounts receivable by $2,500. On 15th July 2021, the supplier deposited the second post-dated cheque, repeating a similar transaction. Post-dated cheques are normal cheques with a future date written on them.

In banking parlance, the term “post-dated cheque” refers to a cheque written by the payer (drawer) for a future date. In simpler terms, a cheque is written with a future date beyond the date on which it was written. In this case, the drawer should always maintain enough funds in the account so that the cheque doesn’t get dishonored/bounced on the specific date mentioned in the cheque.

Alternative to Postdating Checks

Even if your payee (the recipient) is honest, they may make the honest mistake of forgetting and leaving you with bad cheque fee. But in reality, it is not always advisable to issue a post-dated cheque. This is because there could be possibilities that you may not be able to honour the cheque on the given future date. The possible reason could be expected funds have not come into the bank.

He receives checks from some renters on the 28th or 29th of the month that are dated for the first of the next month. He suspects his tenants do this to keep him from cashing their rent checks before they’ve been paid, so their rent checks don’t bounce. In case of insufficient funds, the cheque might bounce when the recipient deposits it in the bank. This will not only result in additional fees from the bank but will also result in the loss of your reputation and the previously established relationship. When a banker pays a PDC cheque and then dishonours a cheque that was supposed to be paid, it will be returned to the owner because of a lack of funds. In addition, Jim ensures the supplier that his bank will pay the cheques on the specified dates.

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