What is a check verification system? Does it differ from a check guarantee agency?
When consumers pay by check, merchants often use an electronic system to determine if the shopper has a history of writing bad checks. There are two types of systems: check verification services and check guarantee agencies. A check verification company provides an electronic database of people who have written bad checks or have had their bank accounts closed as a result of bad check writing. The check guarantee agency takes this service one step further and guarantees that the check is good by reimbursing the retailer if the check bounces. Retailers and banks pay a higher fee for this service. You may have experienced how a check guarantee or verification service works when you last purchased an item by check. A retail clerk usually runs the check through an electronic reader and enters the checking account number or your driver’s license number into a terminal or calls a specific telephone number. The check guarantee or verification agency then approves or denies the check.
