Information AboutCheque |
| CATEGORIES ABOUT CHEQUE | |
| payment systems | |
| persian loanwords | |
| numismatics | |
| accounting source documents | |
|
A cheque, or (in American English ) '''check''', thought to have developed from Persian چك ''chek,'' is a Negotiable Instrument instructing a Financial Institution to pay a specific amount of a specific Currency from a specific Demand Account held in the maker/depositor's name with that institution. Both the maker and payee may be Natural Person s or Legal Entities . HISTORY During the first century A.D., banks in the Persia (Iran) and other territories in Persian Empire under Sassanid Empire issued Letters Of Credit known as ''Sakks.'' They are considered the basis for the modern cheque. 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''. The use of bills of exchange facilitated trade by eliminating the need for merchants to carry large quantities of currency (e.g. gold) to purchase goods and services. A ''draft'' is a bill of exchange which is payable on demand of the payee. Indeed, fragments found in the Cairo Geniza indicate that in the 12th century cheques remarkably similar to our own were in use, only smaller to save costs on the paper. They contain a sum to be paid and then the order "May so and so pay the bearer such and such an amount". The date and name of the issuer are also apparent. The cheque was originally titled such (variously spelled 'check', 'checque' and 'cheque') in reference to the counterfoil used to check against forgery and alterations. In usage up to and including 18th century, 'cheque' had survived as a variant spelling for the word in other meanings (e.g., 'examination', 'inspection') as well, but during that period, the spelling 'cheque' in the sense 'bank note' and 'check' in all other senses appear to have become distinct and cemented among all the English-speaking world outside the U.S. J. W. Gilbart in 1828 (''A practical treatise on banking'', 2nd ed, 1828, Effingham Wilson, London) explains in a footnote 'Most writers spell it ''check''. I have adopted the above form because it is free from ambiguity and is analogous to the Ex-''chequer'' , the royal treasury. It is also used by the Bank Of England "Cheque Office"'. According to Holden, the spelling 'check' survived in some English text-books into the 1920s (M J Holden, ''History of Negotiable Instruments in English Law'', 1955, University of London Press, London). While the British Isles and all Commonwealth countries have adopted the spelling "cheque", the U.S. has retained the form "check". PARTS OF A CHEQUE A cheque shall contain: # place of issue # cheque number # account number MICR # date of issue # payee # amount of currency # signature of the drawer A cheque is generally valid for six months after the date of issue unless otherwise indicated, but this varies depending on where the cheque is drawn. In Australia, for example, it is fifteen months. Legal amount (amount in words) is also highly recommended but not strictly required. TYPES OF CHECKS IN THE UNITED STATES In the United States , cheques (or ''checks'') are governed by Article 3 of the Uniform Commercial Code .
In the United States, 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;'' if a Credit Union it was a ''share draft.'' ''Checks'' as such were associated with chartered commercial Bank s. However, common usage has increasingly conformed to more recent versions of Article 3, where ''check'' means any or all of these negotiable instruments. USAGE Parties to regular cheques generally include a ''maker'' or ''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 maker issues the cheque. 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 '' Bounced ''. When a maker directs the maker's bank to deduct the funds for the amount of a cheque from the maker's account, thus guaranteeing funds will be available for the cheque to clear, and the bank indicates this fact by making a notation on the face of the cheque (technically called an ''acceptance''), the instrument is then referred to as a '' Certified Cheque ''. In Europe, a drawer may present a Cheque Guarantee Card with the cheque when paying a retailer. If the retailer writes the card number on the back of the cheque, the cheque was signed in the retailer's presence, and the retailer verifies the signature on the cheque against the signature on the card, then the cheque cannot be cancelled and payment cannot be refused. A cheque used to pay wages due is referred to as a Payroll Cheque . Payroll cheques issued by the military to soldiers, or by some other government entities to their employees, beneficiants, and creditors, are referred to as Warrants . A Travelers Cheque is designed to allow the person signing it to make an unconditional payment to someone else as a result of paying the account holder for that privilege. Travelers cheques can usually be replaced if lost or stolen, they are often used by people on vacation instead of cash. The use of Credit or Debit Card s has, however, begun to replace the travelers cheque as the standard for vacation money, with an increase in usage by spenders due to ease of use, and an increase of businesses preferring transfers of this kind over travelers cheques. This has resulted in some businesses to no longer accept travelers cheques as currency. A cheque sold by a Post Office or merchant such as a grocery for payment by a third party for a customer is referred to as a Money Order or Postal Order . A cheque issued by a bank on its own account for a customer for payment to a third party is called a Cashier's Cheque , a treasurer's cheque, a '''bank cheque''', or a '''bank draft'''. A cheque issued by a bank but drawn on an account with another bank is a ''teller's cheque''. In addition to issuing cashier's and teller's cheques, banks often sell money orders, and travelers cheques are usually purchased from banks. Some Public Assistance programs 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 program. The voucher can be deposited like any other cheque by a participating Supermarket or other approved business. Paper checks have a major advantage to the maker over Debit Card transactions in that the maker's bank will release the money several days later. Paying with a check and making a deposit before it clears the maker's bank is called " Kiting " and is generally illegal in the United States , but rarely enforced unless the maker uses multiple checking accounts with multiple institutions to increase the delay or to steal the funds. THE DECLINE OF CHEQUES Cheques have been in decline for many years, both for Point Of Sale transactions (for which Credit Cards and Debit Card s are increasingly preferred) and for third party payments (e.g. bill payments), where the decline has been accelerated by the emergence of telephone banking and Online Banking . 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 some European countries, cheques are now very rarely used, even for third party payments. In these countries, it is standard practice for businesses to publish their bank details on invoices in order to facilitate the receipt of payments. Even before the introduction of online banking, it has been possible in some countries to make payments to third parties using ATM s. One of the essential procedural differences is that with a cheque, the onus is on the payee to initiate the payment in the banking system, whereas with a bank transfer, the onus is on the payer to effect the payment. In Germany , cheques have almost completely vanished in favour of direct bank transfer and electronic payment. Direct bank transfer using so-called ''Giro'' accounts (current accounts) has been standard procedure since the 1950s to send and receive regular payments like rent and wages, even mail-order invoices. It is very common to allow the payee to automatically withdraw the requested amount from the payer's account ('' Lastschrifteinzug ''). 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. Due to this, credit cards are rather uncommon in Germany and are mostly used for the credit function rather than for cashless payment. Acceptance of cheques has been further diminished since the late 1990s, because of the abolishment of the Eurocheque . In Finland , banks stopped issuing personal cheques in about 1993. All Nordic Countries have used an interconnected international Giro system since the 1950's, and in Sweden checks are now totally abandoned. Also electronic payments across the European Union are now fast and low-cost, and in effect much more efficient than payments within the United States. In the {Link without Title} . Despite being one of the world's most developed countries, the United States still relies heavily on cheques, caused by the absence of a high volume system for low value electronic payments. When sending a payment by online banking in the United States , the sending bank usually mails a cheque to the payee's bank rather than sending the funds electronically. This is changing rapidly, however, and certain companies with whom a person pays with a cheque will turn that check into an ACH or electronic transaction. Banks try to save time processing cheques by sending them electronically between banks, and by providing drive-in banks where customers can queue inside their cars for depositing cheques. FRAUD ( IDENTITY THEFT ) VIA CHEQUES Since cheques include significant personal information (name, account number, signature and in some countries the address of the account holder), they can be used for Fraud , specifically Identity Theft . SEE ALSO
EXTERNAL LINKS
|
|
|