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A cheque, or check (
American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of variety (linguistics), varieties of the English language native to the United States. Currently, American English is the m ...
; see spelling differences), is a document that orders a
bank A bank is a financial institution Financial institutions, otherwise known as banking institutions, are corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), stat ...

bank
(or
credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned financial cooperative, controlled by its members and operated on a not-for-profit basis. Credit unions generally provide services to members simila ...
) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing the cheque, known as the ''
drawer Image:Drawer.png, Artist's illustration of a drawer box A drawer is a box-shaped container that fits into a piece of furniture in such a way that it can be drawn out horizontally to reach its contents. Drawers are built into numerous types of fu ...
'', has a transaction banking account (often called a current, cheque, chequing, checking, or share draft account) where the money is held. The drawer writes the various details including the
monetary Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner, 174x174px Money is any item or verif ...
amount, date, and a
payee A payment is the voluntary tender of money or its equivalent or of things of value Value or values may refer to: * Value (ethics) it may be described as treating actions themselves as abstract objects, putting value to them ** Values (Western p ...
on the cheque, and signs it, ordering their bank, known as the ''drawee'', to pay that person or company the amount of money stated. Although forms of cheques have been in use since ancient times and at least since the 9th century, it was during the 20th century that cheques became a highly popular non-
cash In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
method for making
payment A payment is the voluntary tender of money or its equivalent or of things of value Value or values may refer to: * Value (ethics) it may be described as treating actions themselves as abstract objects, putting value to them ** Values (Western p ...

payment
s and the usage of cheques peaked. By the second half of the 20th century, as cheque processing became automated, billions of cheques were issued annually; these volumes peaked in or around the early 1990s. Since then cheque usage has fallen, being partly replaced by electronic payment systems. In an increasing number of countries cheques have either become a marginal
payment system A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make its exchange possible.Biago B ...
or have been completely phased out.


Nature of a cheque

A cheque is a
negotiable instrument A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a c ...
instructing a
financial institution Financial institutions, otherwise known as banking institutions, are corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entit ...
to pay a specific amount of a specific currency from a specified
transactional account A transaction account, also called a checking account, chequing account, current account, demand deposit Demand deposits or non-confidential money are funds held in demand accounts in commercial banks. These account balances are usually consi ...
held in the drawer's name with that institution. Both the drawer and payee may be
natural person In jurisprudence Jurisprudence, or legal theory, is the theoretical study of the propriety of law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form ...
s or
legal entities In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its b ...
. Cheques are ''order instruments'', and are not in general payable simply to the bearer as
bearer instrument A bearer instrument is a document which entitles the holder of the document to rights of ownership or title A title is one or more words used before or after a person's name, in certain contexts. It may signify either generation, an official posit ...
s are, but must be paid to the payee. In some countries, such as the US, the payee may endorse the cheque, allowing them to specify a third party to whom it should be paid. Cheques are a type of
bill of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a c ...
that were developed as a way to make payments without the need to carry large amounts of money.
Paper money A banknote (often known as a bill (in the US and Canada), paper money, or simply a note) is a type of negotiable instrument, negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes we ...
evolved from
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument ''Legal instrument'' is a legal Law is a system of rules created and law enforcement, enforced through social or governmental institutions to regulate behav ...
s, another form of negotiable instrument similar to cheques in that they were originally a written order to pay the given amount to whoever had it in their possession (the " bearer").


Spelling and etymology

The spellings ''check'', ''checque'', and ''cheque'' were used interchangeably from the 17th century until the 20th century. However, since the 19th century, in the
Commonwealth A commonwealth is a traditional English term for a political community founded for the common good In philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about reason, Metaphysics, existenc ...

Commonwealth
and Ireland, the spelling ''cheque'' (from the French word ''chèque'') has become standard for the financial instrument, while ''check'' is used only for other meanings, thus distinguishing the two definitions in writing. ''Check'' is the original spelling. The newer spelling, ''cheque'', is believed to have come into use around 1828, when the switch was made by
James William Gilbart James William Gilbart (1794–1863) was an English banker and author. Life He was the General Manager of the London and Westminster Bank Westminster Bank was a British retail bank Retail banking, also known as consumer banking or perso ...

James William Gilbart
in his ''Practical Treatise on Banking''. In
American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of variety (linguistics), varieties of the English language native to the United States. Currently, American English is the m ...
, the usual spelling for both is ''check''. Etymological dictionaries attribute the financial meaning to come from "a check against forgery", with the use of "check" to mean "control" stemming from a check in chess, a term which came into English through French, Latin, Arabic and ultimately from the Persian word ''
shah Shah (; fa, شاه, Šâh or Šāh, , ) was a title given to the emperors and kings of Iran Iran ( fa, ایران ), also called Persia and officially the Islamic Republic of Iran ( fa, جمهوری اسلامی ایران ), is ...

shah
'', or "
king King is the title given to a male monarch in a variety of contexts. The female equivalent is queen regnant, queen, which title is also given to the queen consort, consort of a king. *In the context of prehistory, antiquity and contempora ...
".


History

The cheque had its origins in the ancient banking system, in which bankers would issue orders at the request of their customers, to pay money to identified payees. Such an order was referred to as a ''
bill of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a c ...
''. The use of bills of exchange facilitated trade by eliminating the need for merchants to carry large quantities of currency (for example, gold) to purchase goods and services.


Early years

There is early evidence of using cheques. In India, during the
Maurya Empire The Maurya Empire was a geographically extensive Iron Age The Iron Age is the final epoch of the three-age division of the prehistory Prehistory, also known as pre-literary history, is the period of human history Human h ...
(from 321 to 185 BC), a commercial instrument called the adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person. The ancient Romans are believed to have used an early form of cheque known as ''praescriptiones'' in the 1st century BC. Beginning in the third century AD, banks in
Persian Persian may refer to: * People and things from Iran, historically called ''Persia'' in the English language ** Persians, Persian people, the majority ethnic group in Iran, not to be conflated with the Iranian peoples ** Persian language, an Iranian ...
territory began to issue letters of credit. These letters were termed ''čak'', meaning "document" or "contract". The ''čak'' became the ''sakk'' later used by traders in the
Abbasid Caliphate The Abbasid Caliphate ( or ar, اَلْخِلَافَةُ ٱلْعَبَّاسِيَّةُ, ') was the third caliphate A caliphate ( ar, خِلَافَة, ) is an Islamic state under the leadership of an Islamic steward with the tit ...

Abbasid Caliphate
and other Arab-ruled lands. Transporting a paper ''sakk'' was more secure than transporting money. In the ninth century, a merchant in one country could cash a ''sakk'' drawn on his bank in another country. The Persian poet, Ferdowsi, have used the term "cheque" several times in his famous book, Shahnameh, when referring to Sasanid dynasty.
Ibn Hawqal File:Ibn Hawqal’s map 1 wiki.jpg, 10th century map of the Caspian sea by Ibn Hawqal Muḥammad Abū’l-Qāsim Ibn Ḥawqal (), also known as Abū al-Qāsim b. ʻAlī Ibn Ḥawqal al-Naṣībī, born in Nisibis, Al-Jazira (caliphal province) ...
in the 10th century, quotes the use of a cheque worth 42,000
dinars The dinar () is the principal currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray c ...
in the
Ghana Empire The Ghana Empire ( 300 until 1100), properly known as Wagadou (''Ghana'' being the title of its ruler), was a West African empire located in the area of present-day southeastern Mauritania ) , image_map = Mauritania (orthographic projection ...
. In the 13th century in
Venice Venice ( ; it, Venezia ; vec, Venesia or ) is a city in northeastern Italy Italy ( it, Italia ), officially the Italian Republic ( it, Repubblica Italiana, links=no ), is a country consisting of delimited by the and surrounding ...

Venice
the ''bill of exchange'' was developed as a legal device to allow international trade without the need to carry large amounts of gold and silver. Their use subsequently spread to other European countries. In the early 1500s in the
Dutch Republic The United Provinces of the Netherlands, or United Provinces (officially the Republic of the Seven United Netherlands), commonly referred to in historiography Historiography is the study of the methods of historian ( 484– 425 BC) was ...
, to protect large accumulations of cash, people began depositing their money with "cashiers". These cashiers held the money for a fee. Competition drove cashiers to offer additional services including paying money to any person bearing a written order from a depositor to do so. They kept the note as proof of payment. This concept went on to spread to England and elsewhere.


Modern era

By the 17th century, bills of exchange were being used for domestic payments in England. Cheques, a type of bill of exchange, then began to evolve. Initially, they were called ''drawn notes'', because they enabled a customer to draw on the funds that he or she had in the account with a bank and required immediate payment. These were handwritten, and one of the earliest known still to be in existence was drawn on Messrs Morris and Clayton,
scrivener A scrivener (or scribe A scribe is a person who serves as a professional copyist A copyist is a person who makes copies. The term is sometimes used for artists who make copies of other artists' paintings. However, the modern use of the t ...
s and bankers based in the
City of London The City of London is a city A city is a large .Goodall, B. (1987) ''The Penguin Dictionary of Human Geography''. London: Penguin.Kuper, A. and Kuper, J., eds (1996) ''The Social Science Encyclopedia''. 2nd edition. London: Routledge. It ...

City of London
, and dated 16 February 1659. In 1717, the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker, and still one of the bankers for t ...

Bank of England
pioneered the first use of a pre-printed form. These forms were printed on "cheque paper" to prevent fraud, and customers had to attend in person and obtain a numbered form from the cashier. Once written, the cheque was brought back to the bank for settlement. The suppression of banknotes in eighteenth-century England further promoted the use of cheques. Until about 1770, an informal exchange of cheques took place between London banks. Clerks of each bank visited all the other banks to exchange cheques while keeping a tally of balances between them until they settled with each other. Daily
cheque clearing Cheque clearing (or check clearing in American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the English language native to the United States. Curr ...
began around 1770 when the bank clerks met at the Five Bells, a tavern in in the City of London, to exchange all their cheques in one place and settle the balances in cash. This was the first
bankers' clearing house Cheque clearing (or check clearing in American and British English spelling differences, American English) or bank clearance is the process of moving cash (or its equivalent) from the bank on which a cheque is drawn to the bank in which it was depos ...
. Provincial clearinghouses were established in major cities throughout the UK to facilitate the clearing of cheques on banks in the same town. Birmingham, Bradford, Bristol, Hull, Leeds, Leicester, Liverpool, Manchester, Newcastle, Nottingham, Sheffield, and Southampton all had their own clearinghouses. In America, the Bank of New York began issuing cheques after its establishment by Alexander Hamilton in 1784. The oldest surviving example of a complete American checkbook from the 1790s was discovered by a family in New Jersey. The documents are in some ways similar to modern-day checks, with some data pre-printed on sheets of paper alongside blank spaces for where other information could be hand-written as needed. It is thought that the
Commercial Bank of Scotland The Commercial Bank of Scotland Ltd. was a Scottish commercial bank. It was founded in Edinburgh Edinburgh (; sco, Edinburgh; gd, Dùn Èideann ) is the capital city of Scotland and one of its 32 Council areas of Scotland, council areas. ...
was the first bank to personalize its customers' cheques, in 1811, by printing the name of the account holder vertically along the left-hand edge. In 1830 the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker, and still one of the bankers for t ...

Bank of England
introduced books of 50, 100, and 200 forms and counterparts, bound or stitched. These ''cheque books'' became a common format for the distribution of cheques to bank customers. In the late 19th century, several countries formalized laws regarding cheques. The UK passed the
Bills of Exchange Act 1882 The Bills of Exchange Act 1882 is a United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the U ...
, and India passed the
Negotiable Instruments Act, 1881 Negotiable Instruments Act, 1881 is an act in India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countrie ...
; which both covered cheques. In 1931, an attempt was made to simplify the international use of cheques by the Geneva Convention on the Unification of the Law Relating to Cheques. Many European and South American states, as well as Japan, joined the convention. However, countries including the US and members of the
British Commonwealth The Commonwealth of Nations, generally known simply as the Commonwealth, is a political association of 54 member states, almost all of which are former territories A territory is an administrative division, usually an area that is under the ...

British Commonwealth
did not participate and so it remained very difficult for cheques to be used across country borders. In 1959 a standard for machine-readable characters (
MICR Magnetic ink character recognition code, known in short as MICR code, is a character recognition technology used mainly by the banking industry to streamline the processing and clearance of cheques and other documents. MICR encoding, called the ' ...

MICR
) was agreed upon and patented in the US for use with cheques. This opened the way for the first automated reader/sorting machines for clearing cheques. As automation increased, the following years saw a dramatic change in the way in which cheques were handled and processed. Cheque volumes continued to grow; in the late 20th century, cheques were the most popular non-
cash In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
method for making payments, with billions of them processed each year. Most countries saw cheque volumes peak in the late 1980s or early 1990s, after which electronic payment methods became more popular and the use of cheques declined. In 1969
cheque guarantee card A cheque guarantee card was literally an abbreviated portable letter of credit granted by a bank to a qualified depositor in the form of a plastic card that was used in conjunction with a cheque. The scheme provided retailers accepting cheques w ...
s were introduced in several countries, allowing a retailer to confirm that a cheque would be honored when used at a
point of sale The point of sale (POS) or point of purchase (POP) is the time and place where a retail transaction is completed. At the point of sale, the merchant A merchant is a person who trades in Commodity, commodities produced by other people, espec ...
. The drawer would sign the cheque in front of the retailer, who would compare the signature to the signature on the card and then write the cheque-guarantee-card number on the back of the cheque. Such cards were generally phased out and replaced by
debit cards A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardhol ...
, starting in the mid-1990s. From the mid-1990s, many countries enacted laws to allow for
cheque truncation Cheque truncation (check truncation in American English) is a Cheque clearing, cheque clearance system that involves the Digitization, digitalisation of a physical paper cheque into a Substitute check, substitute electronic form for transmission to ...
, in which a physical cheque is converted into electronic form for transmission to the paying bank or clearing-house. This eliminates the cumbersome physical presentation and saves time and processing costs. In 2002, the
Eurocheque 150px The Eurocheque was a type of cheque used in Europe that was accepted across national borders and which could be written in a variety of currencies. Eurocheques were originally introduced in 1969 as an alternative to the traveler's cheque and ...
system was phased out and replaced with domestic clearing systems. Old Eurocheques could still be used, but they were now processed by national clearing systems. At that time, several countries took the opportunity to phase out the use of cheques altogether. As of 2010, many countries have either phased out the use of cheques altogether or signaled that they would do so in the future.


Parts of a cheque

The four main items on a cheque are: * ''Drawer'': the person or entity whose transaction account is to be drawn. Usually, the drawer's name and account is preprinted on the cheque, and the drawer is usually the signatory. * ''Payee'': the person or entity who is to be paid the amount. * ''Drawee'': the bank or other financial institution where the cheque can be presented for payment. This is usually preprinted on the cheque. * ''Amount'': the currency amount. The amount and currency (e.g., dollars, pounds, etc.) usually must be written in words and in figures. The currency is usually the local currency, but may be a foreign currency. As cheque usage increased during the 19th and 20th centuries, additional items were added to increase security or to make processing easier for the financial institution. A signature of the drawer was required to authorize the cheque, and this is the main way to authenticate the cheque. Second, it became customary to write the amount in words as well as in numbers to avoid mistakes and make it harder to fraudulently alter the amount after the cheque had been written. It is not a legal requirement to write the amount in words, although some banks will refuse to accept cheques that do not have the amount in both numbers and words. An issue date was added, and cheques may become invalid a certain amount of time after issue. In the US and Canada, a cheque is typically valid for six months after the date of issue, after which it is a '' stale-dated cheque,'' but this depends on where the cheque is drawn. In Australia, a cheque is typically valid for fifteen months of the cheque date. A cheque that has an issue date in the future, a post-dated cheque, may not be able to be presented until that date has passed. In some countries writing a post dated cheque may simply be ignored or is illegal. Conversely, an antedated cheque has an issue date in the past. A cheque number was added and cheque books were issued so that cheque numbers were sequential. This allowed for some basic fraud detection by banks and made sure one cheque was not presented twice. In some countries, such as the US, cheques may contain a memo line where the purpose of the cheque can be indicated as a convenience without affecting the official parts of the cheque. In the United Kingdom a memo line is not available and such notes may be written on the reverse side of the cheque. In the US, at the top (when cheque oriented vertically) of the reverse side of the cheque, there are usually one or more blank lines labelled something like "Endorse here". Starting in the 1960s, machine-readable routing and account information was added to the bottom of cheques in
MICR Magnetic ink character recognition code, known in short as MICR code, is a character recognition technology used mainly by the banking industry to streamline the processing and clearance of cheques and other documents. MICR encoding, called the ' ...

MICR
format, which allowed automated sorting and routing of cheques between banks and led to automated central clearing facilities. The information provided at the bottom of the cheque is country-specific and standards are set by each country's cheque clearing system. This means that the payee no longer has to go to the bank that issued the cheque, they can instead deposit it at their own bank or any other bank and the cheque would be routed back to the originating bank, and funds transferred to their own bank account. In the US, the bottom -inch (16 mm) of the cheque is reserved for MICR characters only. Intrusion into the MICR area can cause problems when the cheque runs through the clearinghouse, requiring someone to print an MICR cheque correction strip and glue it to the cheque. Many new ATMs do not use deposit envelopes and actually scan the cheque at the time it is deposited and will reject cheques due to handwriting incursion which interferes with reading the MICR. This can cause considerable inconvenience as the depositor may have to wait days for the bank to be open and may have difficulty getting to the bank even when they are open; this can delay the availability of the portion of a deposit which their bank makes available immediately as well as the balance of the deposit. Terms of service for many mobile (cell phone camera) deposits also require the MICR section to be readable. Not all of the MICR characters have been printed at the time the cheque is written, as additional characters will be printed later to encode the amount; thus a sloppy signature could obscure characters that will later be printed there. Since MICR characters are no longer necessarily printed in magnetic ink and will be scanned by optical rather than magnetic means, the readers will be unable to distinguish pen ink from pre-printed magnetic ink; these changes allow cheques to be printed on ordinary home and office printers without requiring pre-printed cheque forms, allow ATM deposit capture, allow mobile deposits, and facilitate electronic copies of cheques. For additional protection, a cheque can be crossed, which restricts the use of the cheque so that the funds must be paid into a bank account. The format and wording varies from country to country, but generally two parallel lines may be placed either vertically across the cheque or in the top left hand corner. In addition the words 'or bearer' must not be used, or if pre-printed on the cheque must be crossed out on the payee line. If the cheque is crossed with the words 'Account Payee' or similar then the cheque can only be paid into the bank account of the person initially named as the payee, thus it cannot be endorsed to a different payee.


Attached documents

Cheques sometimes include additional documents. A page in a chequebook may consist of both the cheque itself and a stub or ' – when the cheque is written, only the cheque itself is detached, and the stub is retained in the chequebook as a record of the cheque. Alternatively, cheques may be recorded with carbon paper behind each cheque, in ledger sheets between cheques or at the back of a chequebook, or in a completely separate transaction register that comes with a chequebook. When a cheque is mailed, a separate letter or "
remittance advice Remittance advice is a letter sent by a customer to a supplier to inform the supplier that their invoice An invoice, bill or tab is a commercial Commercial may refer to: * a dose of advertising conveyed through media (such as - for example - ...
" may be attached to inform the recipient of the purpose of the cheque – formally, which account receivable to credit the funds to. This is frequently done formally using a provided slip when paying a bill, or informally via a letter when sending an ad hoc cheque.


Usage

Parties to regular cheques generally include a ''drawer'', the depositor writing a cheque; a ''drawee,'' the financial institution where the cheque can be presented for payment; and a ''payee,'' the entity to whom the drawer issues the cheque. The drawer ''drafts'' or ''draws'' a cheque, which is also called ''cutting a cheque'', especially in the US. There may also be a ''beneficiary''—for example, in depositing a cheque with a custodian of a brokerage account, the payee will be the custodian, but the cheque may be marked "F/B/O" ("for the benefit of") the beneficiary. Ultimately, there is also at least one ''endorsee'' which would typically be the financial institution servicing the payee's account, or in some circumstances may be a third party to whom the payee owes or wishes to give money. A payee that accepts a cheque will typically deposit it in an account at the payee's bank, and have the bank process the cheque. In some cases, the payee will take the cheque to a branch of the drawee bank, and cash the cheque there. If a cheque is refused at the drawee bank (or the drawee bank returns the cheque to the bank that it was deposited at) because there are insufficient funds for the cheque to clear, it is said that the cheque has been '' dishonoured''. Once a cheque is approved and all appropriate accounts involved have been credited, the cheque is stamped with some kind of cancellation mark, such as a "paid" stamp. The cheque is now a ''cancelled cheque''. Cancelled cheques are placed in the account holder's file. The account holder can request a copy of a cancelled cheque as proof of a payment. This is known as the cheque clearing cycle. Cheques can be lost or go astray within the cycle, or be delayed if further verification is needed in the case of suspected fraud. A cheque may thus bounce some time after it has been deposited. Following concerns about the amount of time it took the
Cheque and Credit Clearing Company The Cheque and Credit Clearing Company Limited (C&CCC) is a UK membership-based industry body whose 11 members are the UK clearing bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a d ...
to clear cheques, the United Kingdom
Office of Fair Trading , type = Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of Departments of the Government of the United Kingdom, department of the Government of the United Kingdom that deal with matters for which ...
set up a working group in 2006 to look at the cheque clearing cycle. Their report said that clearing times could be improved, but that the costs associated with speeding up the cheque clearing cycle could not be justified considering the use of cheques was declining. However, they concluded the biggest problem was the unlimited time a bank could take to dishonour a cheque. To address this, changes were implemented so that the maximum time after a cheque was deposited that it could be dishonoured was six days, what was known as the "certainty of fate" principle. An advantage to the drawer of using cheques instead of
debit card A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardho ...
transactions, is that they know the drawer's bank will not release the money until several days later. Paying with a cheque and making a deposit before it clears the drawer's bank is called " kiting" or "floating" and is generally illegal in the US, but rarely enforced unless the drawer uses multiple chequing accounts with multiple institutions to increase the delay or to steal the funds.


Declining use

Cheque usage has been declining for some years, both for
point of sale The point of sale (POS) or point of purchase (POP) is the time and place where a retail transaction is completed. At the point of sale, the merchant A merchant is a person who trades in Commodity, commodities produced by other people, espec ...
transactions (for which credit cards and
debit card A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardho ...
s are increasingly preferred) and for third party payments (for example, bill payments), where the decline has been accelerated by the emergence of telephone banking and
online banking Online banking, also known as internet banking, web banking or home banking, is an electronic payment system An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for e-commerce, online ...
. Being paper-based, cheques are costly for banks to process in comparison to electronic payments, so banks in many countries now discourage the use of cheques, either by charging for cheques or by making the alternatives more attractive to customers. In particular the handling of money transfer requires more effort and is time-consuming. The cheque has to be handed over in person or sent through mail. The rise of
automated teller machine An automated teller machine (ATM) or cash machine (in British English British English (BrE) is the standard dialect A standard language (also standard variety, standard dialect, and standard) is a language variety that has undergo ...
s (ATMs) means that small amounts of cash are often easily accessible, so that it is sometimes unnecessary to write a cheque for such amounts instead.


Alternatives to cheques

Alternative
payment system A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make its exchange possible.Biago B ...
s include: #
Cash In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
#
Debit card A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardho ...
payments #
Credit card #REDIRECT Credit card #REDIRECT Credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them for ...

Credit card
payments #
Direct debit A direct debit or direct withdrawal is a financial transaction in which one person (or company) withdraws funds from another person's bank account. Formally, the person who directly draws the funds ("the payee") instructs their bank to collect (i.e. ...
(initiated by payee) # Direct credit (initiated by payer),
ACH Acetylcholine (ACh) is an organic chemical , CH4; is among the simplest organic compounds. In chemistry Chemistry is the scientific discipline involved with Chemical element, elements and chemical compound, compounds composed of atoms, mo ...
in US,
giro A giro transfer, often shortened to giro (), is a payment transfer from one bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a cus ...
in Europe, Direct Entry in Australia #
Wire transfer Wire transfer, bank transfer or credit transfer, is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account A bank account is a financial account maintained by a bank or ot ...
(local and international) such as
Western Union The Western Union Company is an American multinational financial services Financial services are the economic services provided by the finance Finance is a term for the management, creation, and study of money In a 1786 James ...

Western Union
and
MoneyGram MoneyGram International, Inc. is an American money transfer company based in the United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primari ...
#
Electronic bill payment Electronic bill payment is a feature of online, mobile and telephone banking, similar in its effect to a giro, allowing a customer of a financial institution to transfer money from their transaction or credit card account to a creditor or ...
s using
Internet banking Online banking, also known as internet banking, web banking or home banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial insti ...
# Online payment services, e.g.
PayPal PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional pape ...

PayPal
,
Unified Payments Interface Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly tr ...
,
PhonePe PhonePe is an Indian Digital wallet, digital payments and financial services company headquartered in Bangalore, India. PhonePe was founded in December 2015, by Sameer Nigam, Rahul Chari and Burzin Engineer. The PhonePe app, based on the Unified ...
,
Paytm Paytm (a partial abbreviation for "pay through mobile") is an Indian multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from mul ...
and Worldpay # Money orders


Europe

In most European countries, cheques are now rarely used, even for third party payments. In these countries, it is standard practice for businesses to publish their bank details on invoices, to facilitate the receipt of payments by
giro A giro transfer, often shortened to giro (), is a payment transfer from one bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a cus ...
. Even before the introduction of online banking, it has been possible in some countries to make payments to third parties using
ATM ATM or atm often refers to: * Atmosphere (unit) or atm, a unit of atmospheric pressure * Automated teller machine, a cash dispenser or cash machine ATM or atm may also refer to: Computing * ATM (computer), a ZX Spectrum clone developed in Mos ...
s, which may accurately and rapidly capture invoice amounts, due dates, and payee bank details via a bar code reader to reduce keying. In some countries, entering the bank account number results in the bank revealing the name of the payee as an added safeguard against fraud. In using a cheque, the onus is on the payee to initiate the payment, whereas with a giro transfer, the onus is on the payer to effect the payment (The writer of a paper cheque is pushing on a rope: he cannot force money out of his own account and into the destination's account. By writing the paper cheque, he is handing the far end of the rope to the payee, who will pull in his own good time. In contrast, giro is more akin to wire transfer, in that the payer pushes his money away towards the payee). The process is also procedurally more simple, as no cheques are ever posted, can claim to have been posted, or need banking or clearance. In Germany, Austria, Switzerland, Liechtenstein, the Netherlands, Belgium, Luxembourg, Norway, Sweden, Finland, Denmark, and Iceland, giro transfers have been standard procedure since the 1950s for regular payments like rent and wages and even mail-order invoices. In the Netherlands, Austria, and Germany, many invoices are accompanied by so-called ' (Netherlands) or ' (German), which are essentially standardized bank transfer order forms preprinted with the payee's account details and the amount payable. The payer fills in his account details and hands the form to a clerk at his bank, which will then transfer the money. It is also very common to allow the payee to automatically withdraw the requested amount from the payer's account ('''' (German) or '''' (Netherlands)). Though similar to paying by cheque, the payee only needs the payer's bank and account number. Since the early 1990s, this method of payment has also been available to merchants. Debit cards are widespread in these countries, since virtually all banks issue debit cards instead of simple
ATM card ATM or atm often refers to: * Atmosphere (unit) The standard atmosphere (symbol: atm) is a unit Unit may refer to: Arts and entertainment * UNIT, a fictional military organization in the science fiction television series ''Doctor Who'' * Unit of ...
s for use on current accounts. Acceptance of cheques has been further diminished since the late 1990s, because of the abolition of the
Eurocheque 150px The Eurocheque was a type of cheque used in Europe that was accepted across national borders and which could be written in a variety of currencies. Eurocheques were originally introduced in 1969 as an alternative to the traveler's cheque and ...
. Cashing a foreign bank cheque is possible, but usually very expensive. In Finland, banks stopped issuing personal cheques in about 1993 in favour of giro systems, which are now almost exclusively electronically initiated either via internet banking or payment machines located at banks and shopping malls. All
Nordic countries The Nordic countries (also known as the Nordics or ''Norden''; lit. 'the North') are a geographical and cultural region In geography, regions are areas that are broadly divided by physical characteristics (physical geography), human impac ...

Nordic countries
have used an interconnected international giro system since the 1950s, and in Sweden, cheques are now almost totally abandoned; in Denmark, all banks stopped accepting cheques starting on 1 January 2017. Debit cards are now preferred for direct shop payments when not using cash. For large shop payments, such as car purchases, a type of cheque, a
money order A money order is a payment order for a pre-specified amount of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left co ...
( sv, postväxel) is still used. In Poland cheques were withdrawn from use in 2006, mainly because of lack of popularity due to the widespread adoption of
credit Credit (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally spoken in the area around Rome, known as Latium. Through the power of the R ...

credit
and
debit card A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardho ...
s. Electronic payments across the European Union are now fast and inexpensive—usually free for consumers. In the United Kingdom, Ireland, France as well as to some extent in Monaco, Italy and San Marino, cheques are still popular, partly because cheques remain free of charge to personal customers; however, bank-to-bank transfers are increasing in popularity.


United Kingdom

Since 2001, businesses in the United Kingdom have made more electronic payments than cheque payments. Automated payments rose from 753 million in 1995 to 1.1 billion in 2001 and cheques declined in that same period of time from 1.14 to 1.1 billion payments. Most utilities in the United Kingdom charge lower prices to customers who pay by
direct debit A direct debit or direct withdrawal is a financial transaction in which one person (or company) withdraws funds from another person's bank account. Formally, the person who directly draws the funds ("the payee") instructs their bank to collect (i.e. ...
than for other payment methods, including electronic methods. The vast majority of retailers in the United Kingdom have not accepted cheques as a means of payment for several years, and cheque guarantee cards are no longer issued. For example,
Shell Shell may refer to: Architecture and design * Shell (structure), a thin structure ** Concrete shell, a thin shell of concrete, usually with no interior columns or exterior buttresses ** Thin-shell structure Science Biology * Seashell, a hard out ...
announced in September 2005 that it would no longer accept cheques at their UK petrol stations. This was soon followed by other major fuel retailers, such as
Texaco#REDIRECT Texaco Texaco, Inc. ("The Texas Company") is an American oil subsidiary of Chevron Corporation. Its flagship product is its fuel "Texaco with Techron". It also owns the Havoline motor oil brand. Texaco was an independent company until ...

Texaco
, , and Total. announced in April 2006 that it would stop accepting cheques, initially as a trial in the London area, and
Boots A boot A boot, plural boots, is a type of specific footwear Footwear refers to garments worn on the feet, which typically serves the purpose of protective clothing, protection against adversities of the environment such as ground textures and ...
announced in September 2006 that it would stop accepting cheques, initially as a trial in
Sussex Sussex (), from the Old English Old English (, ), or Anglo-Saxon, is the earliest recorded form of the English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, e ...

Sussex
and
Surrey Surrey () is a county A county is a geographical region of a country used for administrative or other purposesChambers Dictionary The ''Chambers Dictionary'' (''TCD'') was first published by William Chambers (publisher), William and R ...

Surrey
.
Currys Currys (branded as Currys PC World) is a British electrical retailer operating in the United Kingdom and Republic of Ireland, owned by Dixons Carphone. It specialises in selling home electronics and household appliances. Many of its shops i ...
(and other stores in the DSGi group) and
WH Smith WH Smith (also known as WHS or colloquially as Smith's, and formerly W. H. Smith & Son) is a British retailer, headquartered in Swindon Swindon () is a large town in Wiltshire, South West England, lying between Bristol, to the west, and ...

WH Smith
also no longer accept cheques. Cheques are now widely predicted to become a thing of the past, or at most, a niche product used to pay private individuals or for the very large number of small service providers who are not willing to provide their bank details to customers to allow electronic payments to be made to them or do not wish to be burdened with checking their bank accounts frequently and reconciling them with amounts due (for example, music teachers, driving instructors, children's sports lessons, small shops, schools). The UK Payments Council announced in December 2009 that cheques would be phased out by October 2018, but only if adequate alternatives were developed. They intended to perform annual checks on the progress of other payments systems and a final review of the decision would have been held in 2016. Concerns were expressed, however, by charities and older people; who are the main users of cheques, and replacement plans were criticised as being open to fraud. It was therefore announced by the UK Payments Council in July 2011 that the cheque would not be eliminated. 432 million inter-bank cheques and credit-items worth £472,000,000,000 were processed in the United Kingdom in 2016 according to Payments UK. In 2017, 405 million cheques worth £356 billion were used for payments and acquiring cash, an average of 1.2 million cheques per day, with more than 10 million being cleared in Northern Ireland alone. The Cheque and Credit Clearing Company noted that cheques continue to be highly valued for paying tradesmen and utility bills, and play a vital role in business, clubs and societies sectors, with nine in 10 business saying that they received or made payment by cheque on a monthly basis. In June 2014, following a successful trial in the UK by
Barclays Barclays plc () is a British multinational Investment banking, investment bank and financial services company, headquartered in London, England. Apart from investment banking, Barclays is organised into four core businesses: Retail banking, per ...

Barclays
, the UK government gave the go-ahead for a
cheque truncation Cheque truncation (check truncation in American English) is a Cheque clearing, cheque clearance system that involves the Digitization, digitalisation of a physical paper cheque into a Substitute check, substitute electronic form for transmission to ...
system, allowing people to pay in a cheque by taking a photo of it, rather than physically depositing the paper cheque at a bank.


United States

In 2002 the US still relied heavily on cheques, due to the convenience it affords payers, and due to the absence of a high volume system for low-value electronic payments. In practice, transfers of less than about five dollars are extremely expensive, and transactions of less than 50c impossible (transaction fees swallow the payment or exceed it.) The only methods generally available for individuals and small businesses to make payments electronically are electronic funds transfers (EFT) or accepting credit cards. EFT payments require a commercial checking account (which often has higher fees and minimum balances than individual accounts) and a subscription to EFT service costing anywhere from $10 to $25 a month, plus 10¢ per transaction (making transactions of 10¢ or less impossible, and transactions under $1 very expensive.) Credit card payments cost the recipient (or the payer) 33¢ plus 3% of the transaction, making transactions of 33¢ or less impossible, and transactions of $1 or less have at least a 30% service charge. Generally, payments by cheque (as long as the payer has funds in their account) and the recipient deposits it to their bank account, regardless of amount, have a service charge to both parties of zero. Since 2002, the decline in cheque usage seen around the world has also started in the US. The cheque, although not as common as it used to be, is still a long way from disappearing completely in the US. In the US, an estimated 18.3 billion cheques were paid in 2012, with a value of $25.9 trillion. About 70 billion cheques were written annually in the US by 2001, though around 17 million adult Americans do not have bank accounts at all. Certain companies whom a person pays with a cheque will turn it into an Automated Clearing House (ACH) or electronic transaction. Banks try to save time processing cheques by sending them electronically between banks. Cheque clearing is usually done through an electronic cheque broker, such as
The Clearing House The Clearing House is the parent organization of The Clearing House Payments Company (which operates an electronic check clearing and settlement system, a clearing house (finance), clearing house, and a wholesale funds transfer system). Other arms i ...
, Viewpointe LLC or the Federal Reserve Banks. Copies of the cheques are stored at a bank or the broker, for periods up to 99 years, and this is why some cheque archives have grown to 20
petabyte The byte is a unit of digital information that most commonly consists of eight bits. Historically, the byte was the number of bits used to encode a single character of text in a computer and for this reason it is the smallest addressable unit ...
s. The access to these archives is now worldwide, as most bank programming is now done offshore. Many utilities and most credit cards will also allow customers to pay by providing bank information and having the payee draw payment from the customer's account (
direct debit A direct debit or direct withdrawal is a financial transaction in which one person (or company) withdraws funds from another person's bank account. Formally, the person who directly draws the funds ("the payee") instructs their bank to collect (i.e. ...
). Many people in the US still use paper
money order A money order is a payment order for a pre-specified amount of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left co ...
s to pay bills or transfer money which is a unique type of cheque. They have security advantages over mailing cash, and do not require access to a bank account.


Canada

Canada's usage of cheques is less than that of the US and is declining rapidly at the urging of the Canadian Banking Association. The Government of Canada claims it is 6.5 times more expensive to mail a cheque than to make a direct deposit. The Canadian Payments Association reported that in 2012, cheque use in Canada accounted for only 40% of total financial transactions. The
Interac Interac is a Canadian interbank network Interbank is a Peruvian provider of financial services. History Image:Banco Internacional del Peru.jpg, 250px, Interbank office in Arequipa In 1897, Elias Mujica opened an agency at Jiron de la Union ...
system, which allows instant fund transfers via
chip Chip may refer to: Food * Chip (snack type), thin sliced food, cooked until crunchy ** Potato chip, a thin slice of potato that has been deep fried or baked until crunchy, called a "crisp" in some countries, such as the UK. Also used in some relig ...
or
magnetic strip A magnetic stripe card is a type of card capable of storing data by modifying the magnetism Magnetism is a class of physical phenomena that are mediated by magnetic field A magnetic field is a vector field that describes the magnetic infl ...
and
PIN A pin is a device used for fastening objects or material together, and can have three sorts of body: a shaft of a rigid inflexible material meant to be inserted in a slot, groove, or hole (as with pivots, hinges, and jigs); a shaft connected to ...
, is widely used by merchants to the point that few brick and mortar merchants accept cheques. Many merchants accept Interac debit payments but not credit card payments, even though most Interac terminals can support credit card payments. Financial institutions also facilitate transfers between accounts within different institutions with the Email Money Transfer (EMT) service. Cheques are still used for government payments, payroll, rent, and utility bill payments, though
direct depositA direct deposit (or direct credit), in banking, is a deposit of money by a payer directly into a payee's bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions be ...
s and online or telephone bill payments are more widely and increasingly used. The Canadian government began phasing out all government cheques from April 2016.


Asia

In many Asian countries cheques were never widely used and generally only used by the wealthy, with
cash In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
being used for the majority of payments. Where cheques were used they have been declining rapidly, by 2009 there was negligible consumer cheque usage in Japan, South Korea and
Taiwan Taiwan, officially the Republic of China (ROC), is a country in East Asia East Asia is the eastern region of Asia Asia () is Earth's largest and most populous continent, located primarily in the Eastern Hemisphere, Eastern and N ...

Taiwan
. This declining trend was accelerated by these developed markets advanced financial services infrastructure. Many of the developing countries in Asia have seen an increasing use of
electronic payment An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for online transactions. Also known as a subcomponent of electronic data interchange (EDI), e-commerce payment systems have become in ...
systems, 'leap-frogging' the less efficient chequeing system altogether. India is one of the few countries in Asia that did have significant cheque usage. It had a long tradition of using cheques and passed laws formalising cheque usage as early as 1881. In 2009 cheques were still widely used as a means of payment in trade, and also by individuals to pay other individuals or utility bills. One of the reasons was that banks usually provided cheques for free to their individual account holders. However, cheques are now rarely accepted at
point of sale The point of sale (POS) or point of purchase (POP) is the time and place where a retail transaction is completed. At the point of sale, the merchant A merchant is a person who trades in Commodity, commodities produced by other people, espec ...
in retail stores where cash and
cards {{Redirect, CARDS, other uses, Cards (disambiguation){{!Cards The CARDS programme, of Community Assistance for Reconstruction, Development and Stabilisation, is the EU's main instrument of financial assistance to the Western Balkans, covering spec ...
are payment methods of choice. Electronic payment transfer continued to gain popularity in India and like other countries this caused a subsequent reduction in volumes of cheques issued each year. In 2009 the
Reserve Bank of India The Reserve Bank of India (RBI) is India's central bank and regulatory body and is responsible for the Money creation, issue and money supply, supply of the Indian rupee and the Bank regulation, regulation of the Banking in India, Indian banki ...

Reserve Bank of India
reported there was a five percent decline in cheque usage compared to the previous year.


Oceania

In Australia, following global trends, the use of cheques continues to decline. In 1994 the value of daily cheque transactions was A$25 billion; by 2004 this had dropped to only A$5 billion, and by 2018 this had dropped to only A$1 billion, with almost half of this for B2B transactions. Personal cheque use is practically non-existent thanks to the longstanding use of the
EFTPOS Electronic funds transfer at point of sale (EFTPOS; ) is an electronic payment system An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for e-commerce, online transactions. Also known ...
system,
BPAY BPAY is an electronic bill payment Electronic bill payment is a feature of online, mobile and telephone banking, similar in its effect to a giro, allowing a customer of a financial institution to transfer money from their transaction or ...
, electronic transfers, and debit cards. In New Zealand, payments by cheque have declined since the mid-1990s in favour of electronic payment methods. In 1993, cheques accounted for over half of transactions through the national banking system, with an annual average of 130 cheques per capita. By 2006 cheques lagged well behind
EFTPOS Electronic funds transfer at point of sale (EFTPOS; ) is an electronic payment system An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for e-commerce, online transactions. Also known ...
(
debit card A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardho ...
) transaction and electronic credits, making up only nine per cent of transactions, an annual average of 41 cheque transaction per capita. Kiwibank stopped accepting cheques as payment on 28 February 2020, followed by ANZ Bank New Zealand, ANZ on 31 May 2021. Westpac and BNZ will stop accepting cheques on 25 June and 30 June 2021 respectively; ASB Bank, ASB will be the last major bank to phase out cheques on 27 August 2021.


Variations on regular cheques

In addition to regular cheques, a number of variations were developed to address specific needs or address issues when using a regular cheque.


Cashier's cheques and bank drafts

Cashier's check, Cashier's cheques and banker's drafts, also known as bank cheques, banker's cheques or treasurer's cheques, are cheques issued against the funds of a financial institution rather than an individual account holder. Typically, the term ''cashier's check'' is used in the US and ''banker's draft'' is used in the UK and most of the Commonwealth. The mechanism differs slightly from country to country but in general the bank issuing the cheque or draft will allocate the funds at the point the cheque is drawn. This provides a guarantee, save for a failure of the bank, that it will be honoured. Cashier's cheques are perceived to be as good as cash but they are still a cheque, a misconception sometimes exploited by scam artists. A lost or stolen cheque can still be stopped like any other cheque, so payment is not completely guaranteed.


Certified cheque

When a certified check, certified cheque is drawn, the bank operating the account verifies there are currently sufficient funds in the drawer's account to honour the cheque. Those funds are then set aside in the bank's internal account until the cheque is cashed or returned by the payee. Thus, a certified cheque cannot "bounce", and its liquidity is similar to cash, absent failure of the bank. The bank indicates this fact by making a notation on the face of the cheque (technically called an ''acceptance'').


Payroll cheque

A cheque used to pay wages may be referred to as a Paycheck, payroll cheque. Even when the use of cheques for payroll, paying wages and salaries became rare, the vocabulary "pay cheque" still remained commonly used to describe the payment of wages and salaries. Payroll cheques issued by the military to soldiers, or by some other government entities to their employees, beneficiants, and creditors, are referred to as Warrant of payment, warrants.


Warrants

Warrants look like cheques and clear through the banking system like cheques, but are not drawn against cleared funds in a deposit account. A cheque differs from a warrant in that the warrant is not necessarily payable on demand and may not be negotiable. They are often issued by government entities such as the military to pay wages or suppliers. In this case they are an instruction to the entity's treasurer department to pay the warrant holder on demand or after a specified maturity date.


Traveller's cheque

A traveller's cheque is designed to allow the person signing it to make an unconditional payment to someone else as a result of paying the issuer for that privilege. Traveller's cheques can usually be replaced if lost or stolen, and people frequently used them on holiday instead of cash as many businesses used to accept traveller's cheques as currency. The use of credit card, credit or
debit card A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardho ...
s has begun to replace the traveller's cheque as the standard for vacation money due to their convenience and additional security for the retailer. As a result, many businesses no longer accept traveller's cheques.


Money or postal order

A cheque sold by a post office, bank, or merchant such as a grocery store for payment in favour of a third party is referred to as a
money order A money order is a payment order for a pre-specified amount of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left co ...
or postal order. These are paid for in advance when the order is drawn and are guaranteed by the institution that issues them and can only be paid to the named third party. This was a common way to send low value payments to third parties, avoiding the risks associated with sending cash by post, prior to the advent of electronic payment methods.


Oversized cheques

Oversized cheques are often used in public events such as donating money to charity or giving out prizes such as Publishers Clearing House. The cheques are commonly in size; however, according to the ''Guinness World Records, Guinness Book of World Records'', the largest ever is . Until recently, regardless of the size, such cheques could still be redeemed for their cash value as long as they would have the same parts as a normal cheque, although usually the oversized cheque is kept as a souvenir and a normal cheque is provided. Any bank could levy additional charges for clearing an oversized cheque. Most banks need to have the machine-readable information on the bottom of cheques read electronically, so only very limited dimensions can be allowed due to standardised equipment.


Payment vouchers

In the US some Welfare (financial aid), public assistance programmes such as the Special Supplemental Nutrition Program for Women, Infants and Children, or Aid to Families with Dependent Children make ''vouchers'' available to their beneficiaries, which are good up to a certain monetary amount for purchase of grocery items deemed eligible under the particular programme. The voucher can be deposited like any other cheque by a participating supermarket or other approved business.


Cheques around the world


Australia

The Cheques Act 1986 is the body of law governing the issuance of cheques and payment orders in Australia. Procedural and practical issues governing the clearance of cheques and payment orders are handled by Australian Payments Clearing Association (APCA). In 1999, banks adopted a system to allow faster clearance of cheques by electronically transmitting information about cheques, this brought clearance times down from five to three days. Prior to that cheques had to be physically transported to the paying bank before processing began. If the cheque was dishonoured, it was physically returned. All licensed banks in Australia may issue cheques in their own name. Non-banks are not permitted to issue cheques in their own name but may issue, and have drawn on them, payment orders (which functionally are no different from cheques).


Canada

In Canada, cheque sizes and types, endorsement requirements and MICR tolerances are overseen by Canadian Payments Association, Payments Canada. * Canadian cheques can legally be written in English, French or Inuktitut. * A tele-cheque is a paper payment item that resembles a cheque except that it is neither created nor signed by the payer—instead it is created (and may be signed) by a third party on behalf of the payer. Under CPA Rules these are prohibited in the clearing system effective 1 January 2004.


India

The Cheque was introduced in India by the Bank of Hindustan, the first joint stock bank established in 1770. In 1881, the Negotiable Instruments Act (NI Act) was enacted in India, formalising the usage and characteristics of instruments like the cheque, the bill of exchange, and promissory note. The NI Act provided a legal framework for non-cash paper payment instruments in India. In 1938, the Calcutta Clearing Banks' Association, which was the largest bankers' association at that time, adopted clearing house. Until 1 April 2012, cheques in India were valid for a period of six months from the date of their issue, before the
Reserve Bank of India The Reserve Bank of India (RBI) is India's central bank and regulatory body and is responsible for the Money creation, issue and money supply, supply of the Indian rupee and the Bank regulation, regulation of the Banking in India, Indian banki ...

Reserve Bank of India
issued a notification reducing their validity to three months from the date of issue.


Japan

In Japan, cheques are called , and are governed by . Bounced cheques are called . If an account owner bounces two cheques in six months, the bank will suspend the account for two years. If the account belongs to a public company, their stock will also be suspended from trading on the stock exchange, which can lead to bankruptcy.


New Zealand

Instrument-specific legislation includes the Cheques Act 1960, part of the Bills of Exchange Act 1908, which codifies aspects related to the cheque payment instrument, notably the procedures for the endorsement, presentment and payment of cheques. A 1995 amendment provided for the electronic presentment of cheques and removed the previous requirement to deliver cheques physically to the paying bank, opening the way for
cheque truncation Cheque truncation (check truncation in American English) is a Cheque clearing, cheque clearance system that involves the Digitization, digitalisation of a physical paper cheque into a Substitute check, substitute electronic form for transmission to ...
and imaging. Truncation allows for the transmission of an electronic image of all or part of the cheque to the paying bank's branch, instead of cumbersome physical presentment. This reduced the total cheque clearance time and eliminated the costs of physically moving the cheque. The :Banks of New Zealand, registered banks under supervision of Reserve Bank of New Zealand provide the cheque payment services. Once banked, cheques are processed electronically together with other retail payment instruments. ''Homeguard v Kiwi Packaging'' is often cited case law regarding the banking of cheques tendered as full settlement of disputed accounts.


United Kingdom

In the UK all cheques must now conform to an industry standard detailing layout and font ("
Cheque and Credit Clearing Company The Cheque and Credit Clearing Company Limited (C&CCC) is a UK membership-based industry body whose 11 members are the UK clearing bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a d ...
(C&CCC) Standard 3"), be printed on a specific weight of paper (CBS1), and contain explicitly defined security features. Since 1995, all cheque printers must be members of the Cheque Printer Accreditation Scheme (CPAS). The scheme is managed by the Cheque and Credit Clearing Company and requires that all cheques for use in the British clearing process are produced by accredited printers who have adopted stringent security standards. The rules concerning crossed cheques are set out in Section 1 of the Cheques Act 1992 and prevent cheques being cashed by or paid into the accounts of third parties. On a crossed cheque the words "account payee only" (or similar) are printed between two parallel vertical lines in the centre of the cheque. This makes the cheque non-transferable and is to avoid cheques being endorsed and paid into an account other than that of the named payee. Crossing cheques basically ensures that the money is paid into an account of the intended beneficiary of the cheque. Following concerns about the amount of time it took banks to clear cheques, the United Kingdom
Office of Fair Trading , type = Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of Departments of the Government of the United Kingdom, department of the Government of the United Kingdom that deal with matters for which ...
set up a working group in 2006 to look at the cheque clearing cycle. They produced a report recommending maximum times for the cheque clearing which were introduced in UK from November 2007. In the report the date the credit appeared on the recipient's account (usually the day of deposit) was designated "T". At "T + 2" (two business days afterwards) the value would count for calculation of credit interest or overdraft interest on the recipient's account. At "T + 4" clients would be able to withdraw funds on current accounts or at "T + 6" on savings accounts (though this will often happen earlier, at the bank's discretion). "T + 6" is the last day that a cheque can bounce without the recipient's permission—this is known as "certainty of fate". Before the introduction of this standard (also known as 2-4-6 for current accounts and 2-6-6 for savings accounts), the only way to know the "fate" of a cheque has been "Special Presentation", which would normally involve a fee, where the drawee bank contacts the payee bank to see if the payee has that money at that time. "Special Presentation" had been stated at the time of deposit. Cheque volumes peaked in 1990 when four billion cheque payments were made. Of these, 2.5 billion were cleared through the inter-bank clearing managed by the C&CCC, the remaining 1.5 billion being in-house cheques which were either paid into the branch on which they were drawn or processed intra-bank without going through the clearings. As volumes started to fall, the challenges faced by the clearing banks were then of a different nature: how to benefit from technology improvements in a declining business environment. Although the UK did not adopt the euro as its national currency when other European countries did in 1999, many banks began offering euro denominated accounts with chequebooks, principally to business customers. The cheques can be used to pay for certain goods and services in the UK. The same year, the C&CCC set up the euro cheque clearing system to process euro denominated cheques separately from sterling cheques in Great Britain. The UK Payments Council from 30 June 2011 withdrew the existing ''Cheque Guarantee Card Scheme'' in the UK. This service allowed cheques to be guaranteed at point of sales up to a certain value, normally £50 or £100, when signed in front of the retailer with the additional cheque guarantee card. This was after a long period of decline in their use in favour of
debit cards A debit card (also known as a bank card, plastic card or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardhol ...
. The Payments Council proposed to close the centralised cheque clearing altogether in the UK and had set a target date of 31 October 2018. However, on 12 July 2011, the Payments Council announced that after opposition from MPs, charity groups and public opinion, the cheque will remain in use and there would no longer be a reason to seek an alternative paper-initiated payment.


United States

In the United States, cheques are referred to as ''checks'' and are governed by Article 3 of the Uniform Commercial Code, under the rubric of
negotiable instrument A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a c ...
s. * An ''order check''—the most common form in the US—is payable only to the named payee or his or her ''endorsee'', as it usually contains the language "Pay to the order of (name)". * A ''bearer check'' is payable to anyone who is in Possession (law), possession of the document: this would be the case if the cheque does not name a payee, or is payable to "bearer" or to "cash" or "to the order of cash", or if the cheque is payable to someone who is not a person or legal entity, for example if the payee line is marked "Happy Birthday". * A ''counter check'' is one that a bank issues to an account holder in person. This is typically done for customers who have opened a new account or have run out of personalized checks. It may lack the usual security features. In the US, the terminology for a cheque historically varied with the type of financial institution on which it is drawn. In the case of a savings and loan association it was a ''negotiable order of withdrawal'' (compare Negotiable Order of Withdrawal account); if a
credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned financial cooperative, controlled by its members and operated on a not-for-profit basis. Credit unions generally provide services to members simila ...
it was a ''share draft.'' "Checks" were associated with chartered commercial banks. However, common usage has increasingly conformed to more recent versions of Article 3, where ''check'' means any or all of these negotiable instruments. Certain types of cheques drawn on a government agency, especially payroll cheques, may be called a ''payroll warrant''. At the bottom of each cheque there is the routing/account number in
MICR Magnetic ink character recognition code, known in short as MICR code, is a character recognition technology used mainly by the banking industry to streamline the processing and clearance of cheques and other documents. MICR encoding, called the ' ...

MICR
format. The ABA routing transit number is a nine-digit number in which the first four digits identifies the US Federal Reserve Bank's cheque-processing centre. This is followed by digits 5 through 8, identifying the specific bank served by that cheque-processing centre. Digit 9 is a verification check digit, computed using a complex algorithm of the previous eight digits. * Typically the routing number is followed by a group of eight or nine MICR digits that indicates the particular account number at that bank. The account number is assigned independently by the various banks. * Typically the account number is followed by a group of three or four MICR digits that indicates a particular cheque number from that account. * Directional routing number—also known as the transit number, consists of a denominator mirroring the first four digits of the routing number, and a hyphenated numerator, also known as the ABA number, in which the first part is a city code (1–49), if the account is in one of 49 specific cities, or a state code (50–99) if it is not in one of those specific cities; the second part of the hyphenated numerator mirrors the 5th through 8th digits of the routing number with leading zeros removed. A ''draft'' in the US Uniform Commercial Code is any bill of exchange, whether payable on demand or at a later date. If payable on demand it is a "demand draft", or if drawn on a financial institution, a cheque. The electronic cheque or Substitute check in United States, substitute cheque was formally adopted in the US in 2004 with the passing of the "Check Clearing for the 21st Century Act" (or Check 21 Act). This allowed the creation of electronic cheques and translation (Cheque truncation, truncation) of paper cheques into electronic replacements, reducing cost and processing time. The specification for US cheques is given by ANSI committee X9 Technical Report 2.


Turkey

In Turkey, cheques are usually used for commercial transactions only, and using post-dated cheques is legally permissible.


Cheque fraud

Cheques have been a tempting target for criminals to steal money or goods from the drawer, payee or the banks. A number of measures have been introduced to combat fraud over the years. These range from things like writing a cheque so it is difficult to alter after it is drawn, to mechanisms like crossing a cheque so that it can only be paid into another bank's account providing some traceability. However, the inherent security weaknesses of cheques as a payment method, such as having only the signature as the main authentication method and not knowing if funds will be received until the clearing cycle to complete, have made them vulnerable to a number of different types of fraud.


Embezzlement

Taking advantage of the float period (cheque kiting) to delay the notice of non-existent funds. This often involves trying to convince a merchant or other recipient, hoping the recipient will not suspect that the cheque will not clear, giving time for the fraudster to disappear.


Forgery

Sometimes, forgery is the method of choice in defrauding a bank. One form of forgery involves the use of a victim's legitimate cheques, that have either been stolen and then cashed, or altering a cheque that has been legitimately written to the perpetrator, by adding words or digits to inflate the amount.


Identity theft

Since cheques include significant personal information (name, account number, signature and in some countries driver's license number, the address or phone number of the account holder), they can be used for identity theft. The practice was discontinued as identity theft became widespread.


Dishonoured cheques

A dishonoured cheque cannot be redeemed for its value and is worthless; they are also known as an ''RDI'' (returned deposit item), or ''NSF'' (non-sufficient funds) cheque. Cheques are usually dishonoured because the drawer's account has been frozen or limited, or because there are insufficient funds in the drawer's account when the cheque was redeemed. A cheque drawn on an account with insufficient funds is said to have ''bounced'' and may be called a ''rubber cheque''. Banks will typically charge customers for issuing a dishonoured cheque, and in some jurisdictions such an act is a criminal action. A drawer may also issue a ''stop'' on a cheque, instructing the financial institution not to honour a particular cheque. In England and Wales, they are typically returned marked "Refer to Drawer"—an instruction to contact the person issuing the cheque for an explanation as to why the cheque was not honoured. This wording was brought in after a bank was successfully sued for libel after returning a cheque with the phrase "Insufficient Funds" after making an error—the court ruled that as there were sufficient funds the statement was demonstrably false and damaging to the reputation of the person issuing the cheque. Despite the use of this revised phrase, successful libel lawsuits brought against banks by individuals remained for similar errors. In Scotland, a cheque acts as an assignment of the amount of money to the payee. As such, if a cheque is dishonoured in Scotland, what funds are present in the bank account are "attached" and frozen, until either sufficient funds are credited to the account to pay the cheque, the drawer recovers the cheque and hands it into the bank, or the drawer obtains a letter from the payee stating that they have no further interest in the cheque. A cheque may also be dishonoured because it is stale or not cashed within a "void after date". Many cheques have an explicit notice printed on the cheque that it is void after some period of days. In the US, banks are not required by the Uniform Commercial Code to honour a , which is a cheque presented six months after it is dated.


Consumer reporting

In the United States some consumer reporting agencies such as ChexSystems, Early Warning Services, and First Data, TeleCheck have been providing check verification service, cheque verification services that track how people manage their checking accounts. Banks use the agencies to screen checking account applicants. Those with low debit scores are denied checking accounts because a bank can not afford an account to be overdrawn. In the United Kingdom, in common with other items such as Direct Debits or standing order (banking), standing orders, dishonoured cheques can be reported on a customer's credit file, although not individually and this does not happen universally amongst banks. Dishonoured payments from current accounts can be marked in the same manner as missed payments on the customer's credit report.


Lock box

Typically when customers pay bills with cheques (like gas or water bills), the mail will go to a "Post office box, lock box" at the post office. There a bank will pick up all the mail, sort it, open it, take the cheques and
remittance advice Remittance advice is a letter sent by a customer to a supplier to inform the supplier that their invoice An invoice, bill or tab is a commercial Commercial may refer to: * a dose of advertising conveyed through media (such as - for example - ...
out, process it all through electronic machinery, and post the funds to the proper accounts. In modern systems, taking advantage of the Check 21 Act, as in the United States many cheques are transformed into electronic objects and the paper is destroyed.


See also

* Allonge – slip of paper attached to a cheque used to endorse it when there is not enough space. * Blank cheque – cheque where amount has been left blank. * Certified check, Certified cheque – guaranteed by a bank. * E-check, E-cheque – electronic fund transfer. * Hundi – historic Indian cheque like instrument. * Labour cheque – political concept to distribute goods in exchange for work. * Negotiable cow – urban legend where a cow was used as a cheque. * Substitute check, Substitute cheque – the act of scanning paper cheques and turning them into electronic payments. * Transit check – a cheque which is drawn on another bank than that at which it is presented for payment. * Traveler's cheque – a pre-paid cheque that could be used to make payments in stores. * Railway pay cheque – identification used to collect railway workers pay packet. * Warrant of payment


References


Footnotes


Citations

Read also abou
cancelled cheque
{{Use British English Oxford spelling, date=October 2016 Accounting source documents Banking terms Banking Numismatics Cheques, Paper products