The fact that a lot of people have run into trouble with Telecheck prompts them to wonder how Telecheck really works, and where they can find non Telecheck banks while they sort out their problems with the company. Read on

Well, in order for businesses to accept checks as a payment option, while trying to minimize the risk of losing money, they have to have a reliable way of validating those checks. Primarily, merchants don’t want to accept checks that are drawn from accounts where there’s no money or not enough money to cover the check; they also don’t want to accept checks that have been forged, or that could lead to them not receiving payment (as in identity theft cases). So they turn to companies like Telecheck, which for the past 40+ years has been building and maintaining a database filled with information about checking accounts and their owners.

By using Telecheck as a verification middleman, merchants are able to prevent losses associated with accepting checks. This is because if Telecheck “OK’s” the check and then it bounces for whatever reason, the merchant will still get paid by Telecheck because the company guarantees payment of the funds that come from checks it has approved. It’s a common misconception that the decision to approve the check or not is made by Telecheck, but this is not true. A merchant can still accept a check even if the response from Telecheck is negative. In that case, though, they get no help in the reclaiming process because they had been warned not to accept the check.

Considering that Telecheck guarantees the transactions that it has given approval for, business owners would rather take the guesswork out of accepting checks. For this convenience, they pay First Data Corporation, which runs the service. When you write your check, the cashier scans it at the cash register, and your check information is sent to one of TeleCheck’s databases. TeleCheck uses the information to tell the merchant whether you are in the TeleCheck database or not.

Whether you are in the database or not, TeleCheck sends a message back to the merchant. The message has codes that tell the cash register whether you are in the database or not. If the information that is retrieved from the database shows negative information about the customer, the check is denied (technically, Telecheck refuses to cover the check). If the check is accepted, a receipt is printed and signed by that customer. That signature allows the service to present the check electronically to the bank and handle the rest of the payment process. In the event that Telecheck returns negative information, it’s still the merchant’s decision whether to approve your check or not. Once again, TeleCheck doesn’t approve or deny you — they just provide the information to the merchant. The only catch is that when Telecheck refuses to cover a check and the merchant accepts it, that merchant essentially takes the risk of not getting paid if the check bounces for whatever reason, because Telecheck will not get involved in the payment process.

That is not to say that Telecheck never makes mistakes. There are many cases where there have been mistakes in the company’s database, either because incorrect information was sent to them in the first place, or because the information in the database is just not accurate. TeleCheck breaks down their negative information using a code system. When a check or card is denied, the customer is given the bank routing number and checking account number that was denied along with a reason code and a phone number to call so they can sort out the problem. Sometimes TeleCheck will not have any negative information on the account or writer of the check but will also not have enough information to approve the check. This too can lead to a denied check.

Obviously, it is important to stay out of the TeleCheck database. If you bounce checks, or owe banks money, or owe merchants money based on checks you have written, you will end up being “flagged” by TeleCheck and will have a hard time writing checks in the future unless you find non telecheck banks that will give you a second chance checking account.

© How Telecheck Works