What Are Encoded Checks?

Woman writing a cheque.
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"Encoding" might sound to some people like a cryptic way to pass along secret information, but when it comes to encoded checks there is nothing secret about it. Most checks printed domestically are encoded with technology called magnetic ink character recognition, or MICR. This enables businesses involved in checking transactions to smoothly print and process a large number of checks.


About MICR

Any check or document printed with MICR can be read by computers and processed automatically. MICR uses a unique type of ink and font to print the routing and account numbers on personal and business checks. The technology was first introduced to the domestic banking industry in the 1950s and still is used by financial institutions.


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How MICR Works

Every check encoded with MICR technology uses a particular type of magnetic ink. Domestically, E-13B is the ink accepted at financial institutions. The other type of MICR ink, called CMC-7, is commonly used in European countries. MICR is one of the only types of codes that is discernible both to computers and the human eye. Banks use automated document readers that quickly read and process the encoding. MICR is used to print account numbers, bank transit numbers and check numbers. Some businesses that print high volumes of checks also use it to print other check components like amounts and signatures.


Encoding Advantages

Encoding benefits the businesses that print checks and the banks that process them. Businesses that print their checks with MICR encoding save time and resources that would be lost with handwritten checks. Likewise, banks that use MICR technology automatically process checks without needing manual input. This saves the cost of staff time and potential error. MICR is a secure, quality-controlled way to print that is difficult to replicate. If the ink, font or alignment is off, an encoded check can't be processed automatically.


The Encoding Process

Not just anyone can encode a check. To print with MICR, you must have a printer designed for MICR printing, MICR toner, the right font, a check stock designed for MICR, appropriate software and a security cartridge in the printer that prevents unauthorized use. All of this equipment should come from a reputable vendor that has quality control procedures in place to prevent distribution of faulty products.