Q:

Why is it important to teach students about blank checks?

A:

Quick Answer

Many financial planning courses for students include a section that warns against the use of blank checks because they do not include any limits on the amount the payee may claim from the issuer, which can result in various fees or the loss of money. The lessons may also cover other types of blank checks, such as checks from a credit card company that carry interest rates on the funds.

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Full Answer

Though most checking accounts include a free debit card to use for accessing funds, many still include access to paper checks as well, which allow the account holder to issue a promise of payment to another party. The standard procedure for filling out a check is to write the exact amount the account holder wishes to give to the payee, though it is possible to give someone a check without writing in the payment amount, known as a blank check. The biggest issue with writing blank checks is that there is no way to prevent the payee from entering an amount beyond what is appropriate for that situation.

If the payee on a blank check enters an amount beyond what the account holder has in her account, the bank may charge the account holder an overdraft fee for covering the difference. The account holder then must pay the bank back for this additional amount. In the case of credit card blank checks, the account holder must pay interest on the checks in the same fashion as with any other funds taken out against the line of credit.

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