A cheque is a written, dated, and signed instruction to a bank to disburse a specific sum of money. While digital transactions are prevalent, cheques maintain their role in various financial exchanges. This method provides a tangible alternative to cash and facilitates money transfers without carrying physical currency.
Understanding the Parts of a Cheque
A standard cheque contains several distinct components, each serving a specific purpose. The date line, at the top right, indicates when the cheque was written for record-keeping. The “Pay to the Order of” line designates the recipient, or payee, who is authorized to receive the funds. A numerical amount box is present for the payment amount in figures.
The written amount line requires the payment amount to be spelled out in words, confirming the numerical value and preventing alterations. If there is a discrepancy between the numerical and written amounts, the written amount typically takes precedence. The signature line requires the drawer’s authorized signature, validating the cheque. An optional memo line allows for a brief note regarding the cheque’s purpose, aiding in record-keeping for both the drawer and payee.
Pre-printed information includes the bank’s name and logo, identifying the financial institution. The routing number identifies the specific bank, while the account number identifies the individual account. Each cheque also has a unique cheque number, which helps track individual cheques.
How to Write a Cheque
Writing a cheque accurately involves several steps to ensure correct processing. Begin by writing the current date in the upper right corner, either numerically or by spelling out the month.
Next, on the “Pay to the Order of” line, clearly write the full name of the recipient. In the small box to the right, write the payment amount in numbers, placing figures close to the dollar sign to prevent alterations. For example, $125.50 should be written as “125.50”.
On the line below, spell out the exact payment amount in words, matching the numerical value. For cents, write them as a fraction over 100 (e.g., “and 50/100”), and draw a line from the end of the written amount to the end of the line helps prevent additions.
Finally, sign your name on the signature line using permanent ink to reduce fraud risk. The memo line can be used for a brief description, such as an account or invoice number, for personal records.
Depositing and Cashing a Cheque
Once a cheque is received, there are several methods for converting it into usable funds. Before depositing or cashing, the payee must endorse the cheque by signing the back in the designated area. For added security, writing “for deposit only” below the signature is recommended, especially for mobile deposits.
Cheques can be deposited through various channels. Many banks offer mobile deposit services via their apps, requiring clear photos of the endorsed cheque. Alternatively, cheques can be deposited at an ATM or in-person at a bank branch by completing a deposit slip and presenting identification to a teller.
Cashing a cheque provides immediate access to funds. This can be done at the issuing bank (the bank whose name is printed on the cheque), often with a fee for non-customers, or at one’s own bank. Some major retailers and check-cashing stores also offer cashing services, typically for a fee.
It is advisable to cash or deposit cheques promptly. Personal and business cheques are generally valid for six months (180 days) from their issue date; after this, they may be considered “stale-dated” and honored at the bank’s discretion.
Common Cheque Issues and Security Tips
While cheques remain a valid payment method, understanding potential issues and security measures is important. A common problem is a “bounced cheque,” which occurs when the drawer’s account lacks sufficient funds, resulting in the cheque being dishonored and potentially incurring fees. If a cheque needs to be canceled, the drawer can request a “stop payment” from their bank, though this usually involves a fee.
Preventing cheque fraud involves several practices. Always use permanent ink when writing cheques, and fill all blank spaces completely to prevent unauthorized alterations. Avoid signing blank cheques; only fill in the recipient’s name and amount before signing. Store unused cheques securely, treating them like cash, and shred old banking documents before discarding them to protect sensitive information. Regularly review bank statements to quickly identify any suspicious transactions, and contact your bank immediately if fraud is suspected.