Negotiable Instruments and Check Processing Flashcards
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Read the first 6 Negotiable Instruments and Check Processing flashcards as text
When a check is returned due to insufficient funds (NSF), who is typically charged the NSF fee?
Answer: The account holder who wrote the check
The NSF fee is charged to the account holder whose account lacked sufficient funds to cover the check they wrote.
What is a 'stale-dated' check?
Answer: A check older than 6 months that a bank may refuse to honor
Under UCC Article 3, a bank is not obligated to pay a check presented more than six months after its date, as it is considered stale-dated.
Which of the following is a MICR line element found at the bottom of a US check?
Answer: Routing/transit number
The MICR (Magnetic Ink Character Recognition) line contains the routing/transit number, account number, and check number for automated processing.
A teller receives a check made payable to 'John Smith OR Mary Smith.' Who may endorse and cash this check?
Answer: Either John or Mary Smith alone
When a check uses 'OR' between payees, either person may endorse and negotiate it independently without the other's signature.
What is a 'certified check'?
Answer: A personal check guaranteed by the bank after verifying and setting aside funds
A certified check is a personal check that the bank has verified and guaranteed by setting aside the check amount from the customer's account.
Under Regulation CC, which type of deposit is typically subject to an extended hold of up to 7 business days?
Answer: A check deposited by a new account holder (account open less than 30 days)
Regulation CC allows banks to place extended holds on deposits to new accounts (open fewer than 30 days) because the customer's deposit history has not been established.