Check Acceptance Considerations

Individual states within the United States govern the acceptance guidelines for checks tendered within their jurisdiction.

The ability to prosecute may be limited if the state guidelines are not followed. Collection costs could be higher for customers who do not adhere to the state guidelines (i.e., customer contracts for services from a third party, such as a check service provider).

Key implementation considerations that apply to accepting checks include:

  • Check service provider and services

  • Check payments

  • Services offered by transaction processors and check service providers

  • Magnetic ink character recognition and card readers

  • Check types

  • Identification options

Check Service Provider and Services

A check service provider is a transaction processor that offers a variety of check acceptance services to merchants. The merchant negotiates terms and tailors the acceptance policies with the designated check service providers. Based on a merchant’s specific market requirements, more than one check service provider may be required.

Check service providers also support authorization verification services, either directly or indirectly, through the same transaction processors used for credit card processing. However, the Elavon Gateway Application maintains direct interfaces to check processors, to ensure the best experience for you, our customers.

Check Payments

Check payments are the paper equivalent of cash. Checks are numbered and contain areas for the customer to write in the name of the payee, purchase amount, date, and signature. Each check contains a full name, plus a Magnetic Ink Character Recognition (MICR) number at the bottom that identifies the customer bank, checking account number, and check number. Generally, merchants require some form of identification to verify that the customer using the check is the same person indicated on the check.

Checks are widely accepted by many POS systems using check and MICR readers. These check payments can be electronically authorized to minimize the risk of loss from fraud. Check authorization is offered by transaction processors who process other types of electronic payments, and check service companies whose entire business is processing check payments.

Services Offered by Transaction Processors and Check Service Providers

Your POS system is responsible for securing the MICR information from the presented check. The services offered by transaction processors and check service providers include:

  • Electronic check conversion

  • Check verification

  • Check guarantee

Electronic check conversion can be combined with verification or guarantee services as well, but this guide is focused on the primary check service in all cases.

The following table describes how each check service works:

Check Services Description
Check Conversion When approved, a financial transaction results in funds moving from the check writer’s account to the merchant’s account. An authorization that is obtained and submitted on a merchant’s Demand Deposit Account (DDA) is a record for funding at the end of the day, along with the credit card transactions. A physical check does not need to be deposited at the merchant’s bank. The funds are moved through an Automated Clearing House (ACH). Some check conversion products can be combined with check verification or check guarantee, to reduce the risk of performing a check conversion where physical goods are exchanged.
Check Verification A non-financial transaction which requires a normal deposit of the physical check to fund the merchant account. Check verification validates that the bank account associated with the check does not have a bad check status and therefore, is not a high risk. Processors may verify that the check writer’s account is not on a negative file. The negative file contains the accounts that have insufficient funds (NSF) checks written against them.

This is not available in Fusebox at this time.
Check Guarantee A non-financial transaction that requires a normal deposit of the physical check to fund the merchant account.

Check Guarantee Services may include:
  • Some check guarantee services verify that the check amount exists in the checking account at the time of purchase. This essentially guarantees that the merchant will receive funding for the purchase.
  • Other check guarantee services rate customers with a beacon score or credit worthiness. Based on the score, these services may guarantee a person’s check, but may not actually check the balance in the account.
  • May include NSF recovery and full payment to the merchant for any check that is not recovered, as long as the required identification and process was followed during the acceptance and guarantee.
Check Guarantee can be quite expensive, but can reduce risks associated with accepting checks where physical goods are exchanged.

The check services currently offered to merchants have different requirements for the data that must be gathered during the authorization process. Elavon has documented the most common check authorization requirements in this guide. For check authorization requirements specific to particular transaction processors, refer to the appropriate processor section of the TPP Interface module guide.

This is not available in Fusebox at this time.

Magnetic Ink Character Recognition and Card Readers

Your POS system is responsible for securing the MICR information from the check presented through a MICR card reader. Unlike credit cards, there are no standard formats for the MICR line located on the bottom of a check. The check reader manufacturers support the most common formats.

The formatting and presentation of collected MICR data to the Elavon Gateway applications varies by check service provider and transaction processor.

Check Types

Specific identification is required for each type of check presented. All POS systems should be able to identify the type of check and prompt for the appropriate type of identification.

Check types include:

  • Personal

  • Business

  • Corporate

  • Payroll

  • Government

Identification Options

The most common types of identification are listed below. These types can vary depending on the check service provider and the end user’s merchant preferred business practices:

  • Check number

  • Date of birth

  • Full MICR

  • Partial MICR

  • Alternate IDs such as social security numbers, courtesy cards or military IDs

  • Driver’s license number and state code (swiped or manually entered, depending on the issuing state)

The check service provider may require more than one type of identification.