Utility of Postdated Checks Is Lost In Race for Electronic Efficiency

WHAT if you embark tomorrow on a cruise for three weeks but your rent check is due in two. Or you prefer to pay your credit-card bill immediately, even though the bill says you have 25 days. Or you find yourself with ``too much month left at the end of the money.''

Whether your checking-account balance is low or you want to maximize interest earnings, a number of situations encourage the practice of postdating checks.

Supposedly, the future date is the earliest the payee can turn the check into money. The effectiveness of postdating, however, varies according to bank, state law, and circumstance. Chances are high that the check will come home within three days, even if you planned on its returning weeks later.

Spokespeople at the American Bankers Association (ABA), the Texas Bankers Association (TBA), and NationsBank tell how the check-dating game really works:

As in the past, tellers will usually refuse to cash a postdated check, even though new state laws and a bank's agreement with customers may insist that the date is irrelevant. But knowing that customers like to postdate, banks try to honor their clients' wishes.

It's different for postdated checks that the payee deposits. Although in the 1960s most states had laws that said checks were not properly payable until their date, by then banks had begun to disregard the dates because of the rising volume of deposited checks.

Customers had the right to complain if a bank processed a postdated check and it bounced. But banks preferred to refund a bounce fee than to slow down processing. Today, American banks process 60 billion checks a year.

Check-clearing is handled by machines similar to those that sort mail. The machines read the bank and account information printed on the check in magnetic ink. A machine operator reads the handwritten amount and codes it onto the check in magnetic ink. During this process, the check moves through the bank at 70 miles an hour. It needs to. Thanks to the Expedited Funds Availability Act of 1988, funds from local checks must be available within two days - and ``local'' means checks coming from the same Federal Reserve check-clearing area. One such area stretches from West Texas to California.

This month, an electronic system for transferring checks was announced by five major Texas banks that together handle more than one-third of the state's deposits. By the end of the year, some of those banks will exchange all their checks on the system, reducing handling time by a day.

In 1990, the National Conference of Commissioners on State Laws revised portions of the Uniform Commercial Code that governed handling of checks. This model legislation says banks do not have to pay attention to the date on a check unless a customer notifies the bank specifically. Thirty-six states have signed on.

If banks can't be bothered about the date on checks, then the words, ``Void after 90 days,'' which appear on government and some corporate checks, must be all bark and no bite, right?

Wrong. Corporate clients pay extra to have their banks eyeball the date and add 90 days. That way corporations can keep their books balanced and not worry about ``stale'' checks.

But even if that 90-day period lapses, ``the debt hasn't been extinguished,'' says Tom Greco, ABA associate general counsel. Just ask the issuer for another check.

Another wrinkle is that banks are under no obligation to honor checks more than six-months old. ``The account may be long gone,'' says Gayle Vickers, TBA assistant general counsel.

Ed Alwood, an ABA spokesman, warns against buying blank checks from sources other than a bank. ``Those bargains aren't necessarily bargains,'' he says. The paper may be cheap and prone to jamming the bank's machinery. The magnetic ink may be too thin for machines to read. And if the tigers or sailboats in the background design are in the wrong place, the bank may misread the check amount, Mr. Alwood says.