Sam Sez

Date: March 5, 1999

Question: "Why are banks eliminating cancelled checks before Y2K?"

Answer: Perhaps, it is a move to conserve paper. Or, the banks are highly confident in the financial systems which credit and debit checking accounts.

It would seem that a reasonable or prudently cautious institution would continue with the paper trail until the turn of the millenium. This would serve as a verification process for financial books and records. It would provide the means to reconcile accounts. If all goes well, it is a cheap insurance policy. Besides, cancelled checks have served well as a receipt of payment for hundreds of years. It should be noted that while you think that all your financial requirements are satisfied by one institution it really is an elaborate array of separate subsidiaries and servicing companies.

The bottom line is that funds held on deposit, outstanding mortgage, other loans, and credit card balances may not be netted in event of a problem. In other words, systems which track what is owed versus what is owed may have different compliance readiness.

It may be wise to keep those checks for another year. It should be noted that you may have to positively affirm to your bank that you want the hard copies.

Front images of a check show who the intended recipient was, the intended amount was and a date. However, when push comes to shove, it is the back side of the check which reveals who received payment, when, and what financial intermediaries were involved. This back-side information is fundamental to a thorough account reconciliation.

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