Cheque facts for kids
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A cheque (or check in American English) is a document that orders a bank 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, the drawer, has a transaction banking account (often called a current, cheque, chequing or checking account) where their money is held. The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the amount of money stated.
Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money.
Cheques must be written to a person or business. A cheque that is not written to anyone can be very bad because if it is lost, anyone who finds it can get the money. A cheque that is written to a person but does not have the amount of money written is a blank cheque.
Cheques can be lost or go astray within the cycle, or be delayed if further verification is needed in the case of suspected fraud. A cheque may thus bounce some time after it has been deposited.
History
Although forms of cheques have been in use since ancient times and at least since the 9th century, it was during the 20th century that cheques became a highly popular non-cash method for making payments and the usage of cheques peaked. By the second half of the 20th century, as cheque processing became automated, billions of cheques were issued annually; these volumes peaked in or around the early 1990s. Since then cheque usage has fallen, being partly replaced by electronic payment systems. In an increasing number of countries cheques have either become a marginal payment system or have been completely phased out.
Parts of a cheque
The four main parts of a cheque are:
- Drawer, the person who makes the cheque
- Payee, the person who gets the money
- Drawee, the bank that pays the money for the cheque
- Amount, the amount that has to be paid
When more people started to use cheques, more things were added to make them more secure and easy to track. They started to require the drawer's signature to be confirmed. The signature on a cheque is the main way to tell if a cheque is real. Cheques also started to need the amount written in words and numbers. This made it harder to make mistakes and harder to change the cheque after it was already written.
Issue dates have also been added to cheques. A cheque is invalid if a long time has passed since the issue date. A cheque with an issue date in the past is called an antedated cheque. A cheque with an issue date in the future is called a post-dated cheque. Usually, a person cannot get money from a post-dated cheque until after the issue date has passed.
Cheque numbers are also used often. Every cheque has a different cheque number. This is to make sure people can't get money twice from one cheque.
Declining use
Cheque usage has been declining for some years, both for point of sale transactions (for which credit cards and debit cards are increasingly preferred) and for third party payments (for example, 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. Cheques are also more costly for the issuer and receiver of a cheque. In particular the handling of money transfer requires more effort and is time consuming. The cheque has to be handed over in person or sent through mail. The rise of automated teller machines (ATMs) means that small amounts of cash are often easily accessible, so that it is sometimes unnecessary to write a cheque for such amounts instead
Images for kids
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Cheque signed by US President Gerald Ford
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Barclay's and Co. cheque. For 39 pounds, 4 shillings, and 2 pence. Issued in London by Messrs Barclay and Tritton, 1793. On display at the British Museum in London
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An English cheque from 1956 having a bank clerk's red mark verifying the signature, a two-pence stamp duty, and holes punched by hand to cancel it. This is a "crossed cheque" disallowing the transfer of payment to another account.
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Symbolic cheques are used at events to depict money offered to the payee.
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Presentation of the Ansari X Prize $10 million award
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A sample cheque issued by UCO Bank in India
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See also
In Spanish: Cheque para niños
