Do You Need Magnetic Ink (MICR
Ink) to Print Your Own Checks?
Technically, no. However, I wouldnít print checks without it. Be wary of software vendors who oversimplify the issue and claim that you can always print your own checks without magnetic ink.
The entire check doesnít need magnetic ink. The most important part is your bank information like the routing number and account number. These are the funny looking numbers along the bottom of a check, also known as the MICR line. If you had these numbers preprinted and youíre only printing payee information, you donít need magnetic ink.
Computers with magnetic readers read the account information off these checks to speed processing. While we are slowly moving towards optical readers, you are still likely to have your check run through a non-optical reader.
If you print your own checks without MICR Ink, you run the risk that the check will pass through a non-optical reader. Then, the check has to be processed manually. Manual processing can result in a fee for you and/or your payee, as well as slower payments.
If youíre going to print your own checks, do yourself a favor and use magnetic ink. It is more expensive than regular ink, but itís not outrageous. You donít have to use it exclusively when you print your own checks Ė you can use MICR Ink for everyday print jobs.
What kind of safeguards do we need to take into
consideration to open an account for a customer who has started to use computer
generated checks for his business using MICR Ink? And also the checks bear printed signatures
put on by his computer? We don't have a facsimile agreement for this account.
Can you tell me if we are assuming additional liability by honoring his checks
issued this way? What should we do to protect ourselves?
First of all, you need a facsimile signature agreement on the account ASAP. The customer needs to understand and agree that your institution will not be able to discern the difference between a legitimately printed check using MICR Ink and one that is fraudulently printed out after-hours by the cleaning crew. The purpose of a facsimile signature agreement is to shift the risks associated with using a facsimile signature to the customer.
Second, it is a wise idea to spell out for the customer, preferably in writing (with a copy retained for your files), the potential pitfalls of using this system. Your letter to the customer should stress the need to control physical access to the computer, control remote access to the computer (such as via modem), and to control access to the check stock and the computer program that produces the checks using MICR Ink. There should be password protection on the computer and, if possible, on the program itself. No one should have access to it other than authorized individuals. If you offer online banking, the customer should be urged to review check postings on a daily basis in order to spot fraudulent items at the earliest possible time. The use of a positive pay system would also be recommended. This would allow the customer to transmit a list of checks issued, along with amounts. Your institution would then utilize the list in determining which items to pay.
Finally, don't overlook the need to educate the customer about the need to use the proper MICR Ink for printing the MICR line on the checks. If the customer fails to use MICR Ink, the checks will require more work to process.
The American Bankers Association recently addressed this problem, passing on a warning by the Bank Fraud Committee on the improper desktop publishing of checks using MICR Ink. They warned that some questionable makers of check-publishing software are causing problems for consumers and businesses by not recommending the proper MICR Ink required to process checks in high-speed equipment. Special MICR Ink enables machines to process checks at speeds of more than 60 miles per hour. Improper ink slows down the system for all check writers and can cause consumers and business customers ill will, as well as serious delays in clearing and posting. When this MICR Ink is not used, banks must pull the item out of the system, inspect the check for possible fraud and manually alter it for proper processing.
Many retail stores now use MICR Ink as part of their check acceptance process. Consumers presenting checks that do not contain magnetic ink may experience situations where a retailer may question the validity of their check because it contains improper ink. In order to avoid costly and embarrassing delays for consumers, businesses and their customers, the Deposit Account Fraud Committee of the American Bankers Association and the American Standards Committee X9 offer the following tips when purchasing desktop publishing software for printing checks:
Beware of any check printing software that
says you don't need MICR Ink;
Consult your bank before making any change to
your check design;
Ask your bank for its check printing
Check the references of any desktop
publishing company you deal with;
Ask your bank for its recommendations of
software companies, paper check stock and magnetic ink toner; and
Use the American national check standards developed by ASC-X9. See www.X9.org for more information. The Accredited Standards Committee X9-Financial Services is the only industry-wide forum that addresses technical problems, finds the solutions and codifies them as nationally accepted standards.
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