Check Guarantee

Check guarantee is a service offered by certain companies to merchants, ensuring that a check used for payment is valid and will not be returned due to insufficient funds or closed accounts. This service provides merchants with security and confidence when accepting checks as a form of payment, reducing the risk associated with non-payment and bounced checks.

When a merchant uses a check guarantee service, the service provider assesses the risk of the check at the point of sale using various methods such as checking the payer’s banking history and verifying account status. If the check is approved by the guarantee service, they assure the merchant that the check will be paid, and if it bounces, the guarantee service will cover the amount to the merchant.

This service is particularly valuable in industries where large transactions are common and receiving guaranteed payment is crucial. By minimizing the financial risk and administrative burden of dealing with returned checks, check guarantee services enable merchants to safely expand their payment options to include checks, thereby potentially increasing their customer base.

In exchange for this security, merchants pay a fee for each check guaranteed, which is typically a percentage of the check amount. This fee is considered a worthwhile expense for the assurance of payment and the ability to avoid the hassles and financial losses associated with returned checks.