What Is a Check?
A check is a written, dated, and signed draft that directs a bank to pay a specific sum of money to the bearer. The person or entity writing the check is known as the payor or drawer, while the person to whom the check is written is the payee. The drawee, on the other hand, is the bank on which the check is drawn.
- A check is a written, dated, and signeddraftthat directs a bank to pay a specific sum of money to the bearer.
- Checks instruct a financial institution to transfer funds from the payor’s account to the payee or that person's account.
- Check features include the date, the payee line, the amount of the check, the payor’s endorsement, and a memo line.
- Types of checks include certified checks, cashier’s checks, and payroll checks, also called paychecks.
- In some countries, such as Canada and England, the spelling used is “cheque.”
How Checks Work
A check is a bill of exchange or document that guarantees a certain amount of money. It is printed for the drawing bank to provide to an account holder (the payor) to use. The payor writes the check and gives it to the payee, who then takes it to their bank for cash or to deposit into an account.
Checks essentially provide a way to instruct the bank to transfer funds from the payor’s account to the payee or the payee’s account.
The use of checks allows two or more parties to make a monetary transaction without using physical currency.Instead, the amount for which the check is written is a substitute for physical currency of the same amount.
Checks are generally written against a checking account, but they can also be used to move funds from a savings or other type of account.
Checks can be used to make bill payments, as gifts, or to transfer sums between two people or entities. They are generally seen as a more secure way of transferring money than cash, especially with large sums. If a check is lost or stolen, a third party is not able to cash it, as the payee is the only one who can negotiate the check.
Modern financial tools that work similarly to checks in that they provide a substitute for physical currency include: debit and credit cards, money orders, wire transfers, and internet banking.
History of Checks
Checks have been in existence in one form or another since ancient times. Many people believe a type of check was used among the ancient Romans.
Modern checks, as we know them today, became popular in the 20th century. Check usage surged in the 1950s as the check process became automated and machines were able to sort and clear checks. Check cards, first created in the 1960s, were the precursors to today’s debit cards.
Credit and debit cards—and other forms of electronic payment—have since overshadowed checks as the dominant means of paying for most goods and services. Checks are now somewhat uncommon but still occasionally used.
Features of a Check
While not all checks look alike, they generally share the same key features. The name and contact information of the person writing the check is located at the top left.The name of the bank that holds the drawer’s account appears on the check as well.
There are a number of lines that need to be filled in by the payor:
- The date must be written on the line in the top right corner of the check.
- The payee’s name goes on the first line in the center of the check. This is indicated by the phrase "Pay to the Order Of."
- The amount of the check in a dollar figure is filled out in the box next to the payee’s name.
- The amount written out in words goes on the line below the payee’s name.
- The payor signs the check on the line at the bottom right corner of the check. The check must be signed to be considered valid.
There is also a memo line in the bottom left corner of the check. The payor may use it to make notes, such as a reference number, an account number, or any particular reason for writing the check.
A series of coded numbers is found along the bottom edge of the check, directly underneath the memo line and extending toward the payor’s signature line. These numbers are:
- the bank’s routing number
- the payor’s account number
- the check number
In certain countries, such as Canada, the routing number is replaced with an institution number—which represents the bank’s identifying code—and the transit or branch number where the account is held.
The back of the check has an endorsement line for the payee’s signature when they are cashing or depositing the check. The receiving bank often stamps the back with a deposit stamp at the time it is deposited or cashed, after which it goes for clearing. Once the drawing bank receives the check, it is stamped again and filed. In some cases the check is sent back to the payor.
The oldest surviving American checkbook, from the Bank of New York, dates to the 1790s.
Types of Checks
In addition to the standard personal check, types of checks include certified checks, cashier's checks, and payroll checks, which are all used for different purposes.
A certified check verifies that the drawer’s account has enough funds to honor the amount of the check. In other words, the check is guaranteed not to bounce. To certify a check, it must be presented at the bank on which it is drawn, at which time the bank will ascertain its authenticity with the payor.
A cashier’s check is guaranteed by the banking institution and signed by a bank cashier, which means the bank is responsible for the funds. This type of check is often required for large transactions, such as buying a car or house.
Another type is a payroll check, or paycheck, which an employer issues to compensate an employee for their work. In recent years, physical paychecks have given way to direct deposit systems and other forms of electronic transfer.
When someone writes a check for an amount larger than what is held in their checking account, the check cannot be negotiated. This is referred to as a bounced check.
The check bounces because it cannot be processed, as there are insufficient or non-sufficient funds (NSF) in the account (the two terms are interchangeable). A bounced check usually results in a penalty fee for the payor. In some cases, the payee is also charged a fee.
Other checking account fees can include a monthly service fee, a per-check fee (a charge for every check you write), a check printing fee, and returned deposit item fee. A returned deposit item fee is a fee charged when you deposit a check in your account that bounces.
Do Banks Forgive Bounced Checks?
Banks have different policies on bounced checks. Oftentimes, a bank charges overdraft fees or nonsufficient funds fees on bounced checks. Some banks may provide a grace period, such as 24 hours, in which time you can deposit funds to avoid the overdraft fees.
Do Cashier's Checks Clear Immediately?
Typically, funds from a deposited cashier's check must be available the next business day. However, a bank may place a hold on some of those funds if the check exceeds $5,252. It can also place a hold on the entire amount if it has a reason to believe the check will not clear.
What Is the Difference Between a Certified and Cashier's Check?
Both a certified check and a cashier's check are considered more secure checks than personal checks. Cashier's checks are signed by banks and drawn against a bank's account, while certified checks are signed by an individual and drawn against a personal account. Both checks are guaranteed by the bank, which makes them more secure.
The Bottom Line
Checks are a useful financial tool that makes payments and money transfers more convenient and potentially safer than cash. Different checks are designed for different purposes and for different risk levels. Learning how to use a check correctly can provide you with a secure payment method that you may need or prefer to use in certain circumstances.
A cashier's check uses funds from a financial institution's account. A certified check uses funds from a customer's account. Cashier's checks usually include more security features than certified checks do. The fee to buy a cashier's check tends to be less than the fee to buy a certified check.What is the difference between a bank check and a cashier's check? ›
A cashier's check uses funds from a financial institution's account. A certified check uses funds from a customer's account. Cashier's checks usually include more security features than certified checks do. The fee to buy a cashier's check tends to be less than the fee to buy a certified check.How do you write a check for $1500? ›
For example, if you're writing a check for $1,500, write out “one thousand, five hundred and 00/100.” When writing out the dollar amount in words, write the amount as far to the left as you can.How do you write on a check in words? ›
Write the amount in words
Underneath the "Pay to the Order of" line you can fill in the amount of the check in words. For example, $1,298.24 would be written as: one thousand two hundred ninety eight & 24/100.
The check will move from the deposit bank to the drawing bank as part of the check clearing process. The process starts when a check is deposited to a bank. The bank will then set about contacting the drawing bank. The check is cleared when the depositing bank has received the check and funds from the drawing bank.How to write a check for $1,000 dollars? ›
For a $1,000 check, you would write “One Thousand (00/100). The (00/100) indicates zero cents. You do not have to write the word “dollars” in this section.How does writing yourself a check work? ›
The only difference when you write a check to yourself, versus a check to someone else, is that you put your own name on the “Pay to the order of” line.Do you write the bank name on a check? ›
Your bank's name appears on every check you write. However, this section doesn't contain important info, such as the routing number. A phone number and address may be included, or you might just see the bank's logo.Can I write checks from my checking account? ›
You already know in many ways how your checking account works. You write paper checks, withdraw money from an automated teller machine (ATM), or pay with a check card. Your paycheck might go by "direct deposit" into your account, or you might deposit checks at a bank's teller window or ATM.What happens when you write a check on your bank account? ›
When you write a check, the payee deposits the check to his or her bank, which then sends it to a clearing unit such as a Federal Reserve Bank. The clearing unit then debits your bank's account and credits the payee's. From there, the check returns to your bank and is stored until it's destroyed.
Both cashier's checks and certified checks are official checks that are guaranteed by a bank. Compared with personal checks, cashier's checks and certified checks are generally viewed as more secure and less susceptible to fraud.How much does a bank check cost? ›
What is the cost of certified and cashier's checks? Some banks might not charge customers for certified checks, but they may cost up to about $15. Cashier's checks are typically in the $10 to $20 range.What is considered a bank check? ›
Cashier's checks are signed by banks and drawn against a bank's account, while certified checks are signed by an individual and drawn against a personal account. Both checks are guaranteed by the bank, which makes them more secure.What is the safest way to write a check? ›
- Use a pen to write your check. ...
- Write neatly and check your spelling. ...
- Double-check that your words and numbers match. ...
- Avoid leaving empty space. ...
- Avoid writing a check to 'cash. ...
- Avoid issuing blank checks. ...
- Protect yourself from identity theft. ...
- Dispose of checks carefully.
- Date the Check. Include the date on the top right-hand corner of the check. ...
- Fill in the Recipient's Name. ...
- Write Out the $1,000 Amount in Numbers. ...
- Write Out the $1,000 Amount in Words. ...
- Add Your Signature. ...
- Fill in the Memo Line (Optional) ...
- Review and Detach the Entire Check.
If someone gives you a check and they've spelled your name incorrectly, endorse the back of the check with the incorrect spelling, and then sign your name with the correct spelling on the back of the check. But for future reference, the date, amount, and signature should all be accurate.Do you use the word and when writing a check? ›
The word “and”: Include the word “and” just before you write how many cents the check is for (or just after you write out the full dollar amount). You are writing a check for dollars and cents. If you like, you can use an ampersand (“&”) or plus sign (“+”) instead.