What does post-dated mean?
The term post-dated refers to a payment intended to be processed on a specified future date. People can post-date multiple types of payment methods, including checks and electronic payments. Payments can be post-dated in a number of circumstances, including if someone enters into a payment agreement with a creditor or when regular monthly payments need to be made from a Account. Post-dated payments cannot be withdrawn from an account until the date specified.
Key points to remember
- Postdated refers to a payment intended to be processed on a specified future date.
- You can post-date financial instruments such as checks or you can post-date electronic payments.
- Post-dated payment instruments are covered by the Uniform Commercial Code, which has been adopted by almost all states.
- Although post-dated payments cannot be cashed before the specified date, financial institutions can do so before that date.
How post-dating works
It is customary to pay for goods and services in advance. But in some cases the payer can provide the beneficiary with a post-dated payment. This means that the instrument used to make the payment is dated to a specific date in the future. This can be done using several payment methods, including checks.
By putting a date in the future on a check, the payer indicates that he does not want the payee cash the check until this date. They can also include a note on the memo line stating that this is a post-dated check. For example, if Mike writes a check on January 14, but postdates it to January 28, the bank won’t (or shouldn’t) cash the check for two weeks.
Post-dated payments can also be made electronically. For example, a person with a car loan can schedule the electronic transfer of post-dated payments from their account to the lender.
Financial instruments such as money orders and bank drafts cannot be post-dated because you must pay them in advance.
Post-dated payments can be used for several reasons. For example:
- A person can write a post-dated check when they do not have enough funds in their account, thus avoiding a insufficient funds (NSF) load
- A tenant can provide his owner with post-dated checks for rent when moving in to avoid late fees in case of forgetting to pay
- Someone can offer post-dated payments when they owe money to another person or business
The Uniform Commercial Code (UCC) allows lenders to lend money, secured by the personal property of a borrower. Adopted by almost every state, UCC is a standard set of business laws that was first published in 1952 to regulate financial contracts. Article 3, section 113 UCC sets out the rules applicable to post-dated checks. This section allows financial instruments to be mailed or backdated and indicates that payment cannot be made before the date specified on the instrument.
Keep in mind, however, that banks and credit unions may cash out dated instruments earlier. While they may not do this on purpose, there are cases where checks are done in error. For example, a cashier may not notice the date on the check and process it that day. Or an individual can deposit a check through the automatic teller machine (ATM). If the check is accepted and NSF, the payer may be required to pay NSF charges.
Post-dated checks and payday loans
Payday loans clients frequently use post-dated checks to repay their lenders. These are risky short term loans. An individual borrows a small amount (usually $ 100 to $ 1,500) at a very high interest rate. For example, $ 17.50 per $ 100 for seven days can result in a rate of over 900% on a annualized based.
A payday borrower typically writes the lender a post-dated personal check for the loan amount plus fees. The lender cashes the borrower’s check on the agreed date, usually the borrower’s next payday.
Most payday loan borrowers have bad credit and low income. They may not have access to credit cards, forcing them to use the services of a local or regional payday loan company. To increase the risk, payday loans can be rolled over for Financial expenses.
Risks of post-swimming
Because there is a time lag between when a person writes a post-dated check and when a banker cashes it, sensitive information can remain exposed and vulnerable for days, weeks, or even a month. The opportunity for identity theft is high. Identity theft occurs when a person obtains personal or financial information from another person in order to assume that person’s identity to make transactions or purchases.