A cheque is a document that orders a bank, building society, or credit union, 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, has a transaction banking …
A guide to Cheque
Key takeaways
- A cheque is a written order to pay money from a bank account.
- The person writing the cheque is called the drawer.
- The payee is the person who receives the money.
- The bank that pays the cheque is known as the drawee.
- Cheques must include details like amount, date, and signature.
In plain English
A cheque is a piece of paper that tells a bank to pay someone a specific amount of money from your account. The person who writes the cheque is called the drawer, and they include details like the amount, date, and who the money is going to, known as the payee. By signing the cheque, the drawer authorizes the bank to make the payment.
Why Cheque is relevant in U.S. law
Cheques are an important part of financial transactions in the U.S., allowing people and businesses to pay for goods and services without cash. They provide a paper trail for record-keeping, which can be useful for budgeting or tax purposes. However, with the rise of digital payments, the use of cheques has declined, raising questions about their future in everyday transactions.
When and how Cheque applies
When a person wants to pay someone using a cheque, they fill out the cheque with the payee's name, the amount, and the date, and then sign it. The payee can then deposit or cash the cheque at their bank. The bank, known as the drawee, verifies the drawer's account has sufficient funds before processing the payment. If funds are available, the amount is transferred to the payee's account. If not, the cheque may bounce, leading to fees.
Examples
Scenario: Maria writes a cheque for $200 to James for tutoring services.
Outcome: James deposits the cheque, and Maria's bank pays him $200 from her account.
Scenario: Aisha writes a cheque to her landlord for her monthly rent.
Outcome: The landlord cashes the cheque, and the bank withdraws the rent amount from Aisha's account.
Frequently asked questions
What is a cheque?
A cheque is a written order directing a bank to pay a specific amount from your account to someone else.
How do I write a cheque?
To write a cheque, include the date, payee's name, amount, and your signature. Make sure you have sufficient funds.
Can I stop a cheque after writing it?
Yes, you can request a stop payment on a cheque by contacting your bank, but there may be fees involved.