"Refer to maker" is an instruction written on a check that directs the bank to contact the person who wrote the check (the maker) for payment authorization before processing it. This typically happens when the check lacks sufficient funds or the bank suspects fraud.
When a bank sees "refer to maker" on a check, it stops the check from being processed immediately. Instead, the bank contacts the maker (the person who wrote the check) to verify the transaction. The maker must then provide payment or resolve the issue before the check can proceed.
This process slows down the check-clearing procedure. The bank may charge fees to the maker for the additional work involved in resolving the issue. The payee (the person or entity receiving the check) must wait longer to receive payment.
Most checks can be referred to the maker, but some are more likely to trigger this action:
Banks use "refer to maker" to protect themselves and their customers from financial loss. By verifying the transaction with the maker, banks can ensure that the check is legitimate and that the maker has the funds available to cover the amount.
According to the Federal Reserve, banks are required to follow certain procedures when handling checks, including verifying the availability of funds. This instruction helps banks comply with these regulations.
Many people confuse "refer to maker" with "refer to drawer," but they are the same instruction. The term "drawer" is another word for the maker-the person who wrote the check.
Another misconception is that "refer to maker" means the check is automatically rejected. However, the check is not necessarily rejected; it is simply held until the maker can verify or pay the amount.
Imagine you deposit a check for $500, but the bank notices that the account holder only has $200 in their account. The bank will mark the check as "refer to maker" and contact the account holder. The account holder must then decide whether to transfer funds to cover the check or stop payment on it.
If the account holder fails to respond or provide payment, the bank may return the check to you unpaid. This process can take several days, delaying your access to the funds.
Understanding what "refer to maker" means on a check can help you avoid unnecessary delays and fees. Always ensure that the checks you write have sufficient funds and that the checks you deposit are likely to clear without issues.