Everything You Need to Know About Cheques

Cheques are still popular in some parts of the world, although they are not used as much as they were in the past owing to the widespread use of the internet and credit cards. When paying bills, cheques are still the preferred method for many individuals.

When the system is in place and functioning, the bank agrees to pay the cheque’s amount when it is presented correctly, on the condition that there are enough funds in the payer’s account to cover it.

Types of Cheques:

A check is described as:

  • Order cheques: A cheque may be used to pay money to a specific individual or entity (the payee) designated in writing on the cheque.
  • Bearer cheques: The cheque may be paid to the individual who holds the cheque (the bearer). There is no name in this scenario, but “pay cash” or “pay cash or order” may be written on the cheque.
  • Bank cheques: This means a company has paid you in cash. It’s essentially a check drawn on the bank. It’s typically utilized when making payments that need to be openly secure, such as after purchasing a big item like a car or house.

If there is no name on the cheque, it’s a “bearer” cheque, which means you should be extra careful to write the proper name if you want it to go to a specific individual.

Who Pays?

Your cheque travels from the collecting bank to a central location, where bank officials change all of the cheques that have accumulated between the banks after a complex series of events.

Payment on Demand

In certain cases, you may be paid on the cheque before it has “cleared.” If the cheque is made payable on demand, the amount will be paid out as long as the bank confirms the signature and account information.

Refusal to Pay

A bank may refuse to honour a cheque for a variety of reasons:

  • The cheque has been stopped by the bank and, owing to insufficient funds in the payee’s account (often cheques paid to the payer’s account have not been cleared), you are unable to make payments.
  • The cheque isn’t completed correctly, for example, it is not dated.
  • It’s possible that the amount of money written down is incorrect, and there’s a mismatch between things like “two hundred and ten dollars” and “201-00.” The cheque is postdated and presented before the date on it.
  • The payer has stopped the cheque, and you think the payer does not have the mental capacity to write it. The payer is subject to a bankruptcy petition.

Stopping Cheques

A cheque, like an instruction to pay a specific sum of money to a specified party, maybe countermanded (refuted) at any point up until it is presented for payment. You should contact the bank as soon as possible and discover if you must send in a form. Take careful note of the name of the bank official you spoke with. However, going to the bank and doing it in person is ideal.

“Not Negotiable” Cheques

The majority of individuals prefer to “cross” their cheques and add the words “not negotiable” between the lines. This is a good idea since it informs the bank that the cheque should not be paid on demand but rather sent into the payee’s account.

The clearing system is a method of payment processing in which cheques are sent through the system and arrive at the payee’s account.

If the cheque is not crossed, it is a “legitimate” “negotiable instrument,” which means it may be transferred on delivery to the bank for the amount indicated.

Bank Mistakes

If the bank does not follow your instructions as written on the cheque, this would be considered a violation of the agreement between you and the financial institution.

It can be particularly mortifying in the context of a business connection, such as when a bank dishonours a buyer’s cheque to a vendor. In these instances, you may be able to seek compensation or damages.

However, the banks (both collecting and paying) may have defences against a lawsuit, so it would be critical to contact a lawyer, especially if you believe your reputation has been damaged because the bank did not honour the cheque.

Your Mistakes

What happens if you accidentally payout on a cheque? If the error was truly yours, the bank will debit your account for the amount paid, and you may have no legal option.

For example, if you type the amount in figures and leave a space where that figure may be adjusted while omitting to write down the amount in words.

If someone changes the numbers to calculate a greater sum (usually by adding zeroes) and then fills in the corresponding amount in words, you may be in for an unpleasant surprise.

If you find out that your name has been forged, you must notify your bank right away.

It is important to note that the cheque should always be crossed “not negotiable,” and that no space should be left after the name of the payee or where the money amount is written (no spaces at all, including before, after or in between any figures).