Much like a direct transfer between bank accounts, a check transaction involves only the issuing bank and the recipient’s bank (if this is different from the issuing bank). There are two main types of checks:
1. Bank checks. Also known as bank guaranteed checks, these checks are issued by a bank on behalf of a customer. The money represented by the checks is taken out of the customer’s account by the bank and set aside until the check is cashed or deposited by the recipient. In this way, the bank guarantees that the check’s recipient receives the money due. Because of this, bank checks provide a similar level of security as direct cash payments.
Depending on the recipient’s bank, the amount drawn using the check can either be received as a deposit into the recipient’s banks account, or received as cash at the till. While most Swiss banks charge high fees to issue bank checks (as much as 50 francs per check!), they normally do not charge a fee to cash their own bank checks. Fees for cashing bank checks at third-party banks, on the other hand, can be fairly high (between 10 and 30 Swiss francs, depending on the bank).
Example: You order a check for 1000 francs from your bank. The bank debits 1000 francs from your account and sends you the check. You write out the check to an individual or business and give it or post it to them. The recipient then goes to the bank that issued the check, or to a third-party bank, and exchanges the check for cash or for a deposit into their account.
2. Personal checks. A personal check, also known as a correspondence check, is written by an individual. The amount shown is not withheld by a bank, and therefore is not guaranteed. Instead, the money is deducted from the check writer’s account when the recipient cashes the check.
Personal checks provide a lot of flexibility because you can decide on and fill out the amount you wish to transfer at any time. As long as you are sure that the amount of money you state on a check will be available in your account when the recipient deposits or cashes the check, personal checks can work very well. However, these checks provide less security for recipients because there is no guarantee that they will be able to cash the check.
In many countries, personal checks are provided to customers by their banks for little or no charge. But Swiss banks charge customers between 5 and 20 Swiss francs (depending on the bank) for each personal check issued.
The benefits of using checks
Checks are one of the few secure tools for making direct transfers of funds to recipients whose bank details are not known to you. Only your own bank information is required, and not that of the recipient. For example, if you want to give money to an individual or organization without requesting their bank account information, you can send them a check as long as you know their legal name (in some cases an address may be required).
If you need to make a payment to an individual who does not have a bank account and you either do not have cash on hand or prefer not to make the payment in cash (if you are posting it by mail, for example), a cashable bank-guaranteed check allows you to do this. If you need to make an instant and guaranteed payment which can be cashed anywhere in the world, a bank check lets you do that.
Another benefit of checks is that, by post-dating (specifying a later date at which the check can be cashed), you can insure that the check is only cashed at a time of your choosing. If the money for transactions will only be available in your account at the end of the month, for example, you can specify that date and limit recipients to drawing the money at that time.
This is also useful when, for example, you are paying for services which have not yet been provided. If the check recipient does not provide the services as specified, you can cancel the check and prevent them from drawing the payment. In this way, post-dated checks, or “deferred checks”, are sometimes used as a forward transaction trading instrument, with two parties agreeing to a transaction which can only be performed at a later date.
In these regards, checks fill a gap which is not covered by electronic transfers, which generally require the recipient’s bank account information and normally take several days to clear before the money becomes available in the recipient’s account (particularly where international transfers are concerned).
They also allow for more flexibility than wire transfer services like Western Union and Moneygram, which can only be made at specific locations and collected at predefined locations. At the same time, recipients are required to provide clear identification when cashing a check, which provides a similar level of security. This makes checks a useful tool for sending money overseas.
The downside of using checks for international transactions is that the check will normally have to be physically transported to the recipient by postal services or couriers, while wire transfers are almost instant.
The fact that banks do not normally charge a fee when they cash their own bank checks makes check transactions a tool through which merchants can receive instant, guaranteed, cashless payments at no cost to them. This sets check payments apart from credit card, debit card and postal deposit slip payments, which are handled by financial service providers (banks, issuers, merchant acquirers, credit card networks) which claim processing fees from merchants who accept them. In the case of checks, the cost of having the check issued falls on the payer rather than the recipient.
Cash checks can also be used to draw large amounts of money from your bank account while traveling, which may work out cheaper and more efficient than making multiple ATM withdrawals with a debit card or credit card.
If you reside in one country but want to transfer money from an account in a different country, writing yourself a check drawn on your foreign account provides an alternative when your bank requires you to be physically present to perform a bank wire transfer (some banks require you to order large transactions in person).
The disadvantages of checks
When you cash a check, the bank normally fronts the money and deposits it into your account immediately. However, after paying you the money, it takes the bank some time to clear the check. If your bank cannot clear the check, the check will “bounce”, meaning the money will be debited back out of your account by your bank because the check was not valid. If you have withdrawn the money from your account in the meantime and do not have sufficient assets in your account, you will owe the bank the money.
In Switzerland, checks cashed at the same bank which issues them are usually cleared on the same day, but those issued by other Swiss banks take around 2 days to clear. Checks drawn from banks outside of Switzerland may take 5 to 10 business days to clear.
If you only accept bank checks issued by Swiss banks, the clearing period will not likely pose a problem. If you accept personal checks or checks issued by overseas banks, you should be aware that there is a risk of checks bouncing. For this reason, it is better not to count transactions as complete until checks have been cleared. If you cash checks at you bank, ask your bank representative how long it will take for each check to clear.
You should also be wary of accepting personal checks as immediate payment against goods or services from people who you do not know or trust. Bank checks provide a much safer (and cheaper) option for accepting checks as payment in place of cash.
Using checks in Switzerland
Checks have never been as widely used in Switzerland as they have in many other countries, and cash has remained the Swiss payment method of choice. As a result, the use of checks in Switzerland is now almost redundant. However, checks are widely used for everyday transactions in some countries, and are also commonly used for specific types of international transactions.
Most large Swiss banks (including UBS and Credit Suisse) issue bank checks and will also cash both bank checks and personal checks for their own customers. Bank checks issued by well-known Swiss banks enjoy a high level of acceptance worldwide.
Sadly, due to the limited use of checks in Switzerland, services like cashing checks via mobile, using cash checks (without a designated recipient), getting free checks with your checking account, cashing checks at convenience stores and cashing checks into prepaid card accounts are virtually unheard of.
In almost every case, Swiss banks will only cash or deposit checks for customers who hold an account at the same bank. If you frequently make use of checks, or are interested in using them, make sure to choose a Swiss Bank which issues and cashes checks as a service. Comparing check fees and charges before choosing an account is also important.
Swiss banks which issue, deposit and cash checks for their customers include Credit Suisse, UBS, Raiffeisen banks and larger cantonal banks (including the Zürcher Kantonalbank), among others. Migros Bank issues bank checks, but not personal checks – although customers can cash personal checks from Swiss banks.
The cost of using checks in Switzerland
Aside from limited acceptance, the main downside to using checks in Switzerland is that it is quite costly. While banks in many other countries provide checks to their customers either for free or at a very low cost, most Swiss banks charge you very high fees when they issue checks on their behalf.
Personal checks from Swiss banks cost between 5 and 20 francs per check, depending on the bank, while bank checks can cost as much as 50 francs per check. Some banks go as far as to charge you additional fees for posting checks to your address or letting you collect checks at the till. For these reasons, using checks issued by Swiss banks only makes sense when no cheaper option can be used for a transaction.
Fees charged by Swiss banks for cashing checks, on the other hand, compare favorably with those of other transaction types – especially in the case of bank checks and large international transactions. Bank checks in Swiss francs can generally be cashed instantly at no fee by the Swiss bank that issued them. On the other hand, you may pay fees of up to 10 francs per check when you cash personal checks or foreign currency bank checks at the same Swiss bank which issued them.
Cashing checks from other Swiss banks can cost anywhere from 10 to 30 Swiss francs. Checks drawn on foreign banks typically command the same fee, plus an additional foreign transaction fee charged as a percentage of each transaction (between 1% to 2.5% of the transacted amount, with a high minimum foreign transaction fee).
When cashing foreign checks, you can avoid the foreign transaction fee by depositing the check into an account which uses the same currency that the check is issued in. For example, cashing a U.S. dollar check into a U.S. dollar account at your Swiss bank can help you bypass currency exchange spreads and foreign transaction fees.
Checks fill a niche gap in banking services which is not currently filled by other services. However, the high cost of issuing bank checks in Switzerland negates the saving benefits which are normally associated with checks. The high cost of cashing checks means that they are only a cost-effective instrument for making certain large transactions where a great deal of flexibility is required, or as a last resort when no alternative method of payment is suitable.
Bank transfers from one bank account to another are, in almost every case, the most affordable way to transfer money without transporting cash. Swiss banks normally do not charge for transfers within Switzerland. SEPA transfers to euro-zone countries also benefit from little or no fees and charges at most Swiss banks. Transfers to other countries using an IBAN are often very affordable.
For these reasons, if recipients have bank accounts, you can both save a lot of money by making direct bank transfers rather than using checks or wire transfer services. Selecting the “individual profile” option in the moneyland.ch private account comparison tool lets you specify the types and amounts of transactions you expect to make and find the accounts that best match your needs.