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Cheque
Cheque is a
written order directing a bank to pay money to a person or organization, or to
the bearer. A cheque may be written by any person or organization with money in
a cheque account. The bank transfers the amount specified on the cheque from the
account to the payee, the designated person or organization. The word cheque is
spelled check in the United States and some other countries.
Cheques are widely used because they are safer and more convenient than cash.
For example, a person who has a cheque account does not have to carry large sums
of money, which could be lost or stolen. Cheques can be sent safely through the
post because only the payees can legally cash them. Used cheques, called
cancelled cheques, serve as convenient records of payment.
How the cheque system works. When a
person or organization opens a cheque account, the account holder receives a
chequebook containing blank cheques. The account holder issues a cheque by
writing in the date, the name of the payee, and the amount of money involved.
The account holder also signs the cheque. At regular intervals the bank sends
the account holder a statement. This document lists the deposits made into the
account, and the amounts of the cheques written against it. The statement also
shows the balance, the amount remaining in the account. The bank may enclose the
cancelled cheques for the period.
The payee may cash the cheque--that is, exchange it for cash--or deposit it in a
bank account or transfer it to another person or organization. To cash, deposit,
or transfer a cheque, the payee endorses it by signing it on the back. The
endorser becomes responsible for the payment of the cheque if the issuer's
account lacks enough money to cover it.
After a cheque has been deposited in a bank, the bank collects its money by
sending the cheque back to the bank of the cheque writer. The cheque writer's
bank then charges the depositor's account for the amount involved. Cheques may
be cleared by the bank itself, by a clearing house, or for large payments by a
central bank, such as the Bank of England.
Numbers printed on cheques with magnetic ink identify the bank and the owner of
the cheque account. They enable cheques to be sorted electronically.
Special cheque services. Some payments are required to be made by certified
cheque or by cashier's cheque. Such cheques are accepted almost as readily as
cash because banks guarantee their payment. A certified cheque is an ordinary
cheque made out by a person or organization and then stamped Certified by a
bank. The bank sets aside sufficient funds from the depositor's account to pay
for a cheque that it certifies. A cashier's cheque is the bank's own cheque. The
bank charges the depositor's account for the amount. Cashier's cheques may also
be purchased with cash. |
