A canceled check is a check that has cleared. It’s a check that has been paid by the bank that cashes the check, and endorsed by the payee, the payee’s bank and the Federal Reserve Bank. It can also be used as a proof of purchase or payment if a dispute arises. Some banks send copies of canceled checks with monthly statement to customers, while others make it available online instead of paper. Canceled checks help you to easily merge your check register with your bank statement, and to ensure that the proper amount was paid to the check recipient.
When you deposit a check, the receiving bank will stamp the name of the bank and your account number on the back of the check. On the back of a canceled check, you can find the name of the bank where the recipient of your check deposited it, as well as the account number that received the money. Since it contains important and confidential details, you must keep canceled checks securely stored because the account number and routing number printed on the check can be stolen by identity thieves.
Here’s how to read the back of a canceled check:
- Turn the canceled check at the back. On the right side, you will see the signature of the payee, or the person, organization, company or business to whom the check is written. If it’s an electronic version of the check, you will see this at the rear image.
- Find the electronic stamp that contains the name of the payee’s bank, or the bank where the recipient deposited the check. For most checks, the phrase “For Deposit Only” are stamped in bold. You can see a series of numbers associated with the bank’s stamp and endorsements from bank supervisors or tellers.
- Find the account number immediately above or below the bank’s name on the stamp. It shows the bank and the account where the recipient deposited the funds from the check.
- Find your bank’s stamp that features letters and numbers showing that the check was approved for payment and the amount were deducted from your account. This is often found in the middle of the check.
Some banks stamp “Paid” on the front side of the check instead of the back, but it’s not that common. Also, some banks include a Federal Reserve regional bank stamp through which a lot of checks are processed.
Canceled checks should be kept as proof of payment of bills and for tax claims. You can keep on storing your canceled checks, but it doesn’t take long before these and your other files fill up your drawers and folders. In most cases, canceled checks can be shredded after one year.
However, for canceled checks needed to support your tax filings, the Federal Deposit Insurance Corporation recommends keeping them for at least seven years, in case the Internal Revenue Service (IRS) would come after you for tax under-reporting, or for questions about tax-related information for that length of time. Also, the canceled checks you have relating to major life purchases like your house should be kept permanently. Your checks for home upgrades and purchases of major fixtures should also be kept indefinitely – it may come handy if you need to sell your property.
If your bank doesn’t return canceled checks, you can ask for it, and the bank must provide you with a copy of the check within a reasonable period of time from your request. Banks must either retain the canceled checks, or have the capacity to provide copies of the checks for seven years. Your bank may charge you a fee for this service.