I guess you know what cheque is. If you don’t, don’t worry. This post will help you understand the basics about bank cheques.
To start with, it is interesting to know that a cheque or a check are one and the same. In India, we call it a cheque. And In the US, it is generally referred to and spelled as check. Both sounds same and are correct!
So, what a Cheque is? And how does a cheque look like? Let’s find out:
A Cheque is a Financial Instrument used to make payments.
Let me explain that: On your bank account, bank’s issue you these paper instruments which are rectangular in shape. You can write these cheques to anyone you owe a payment to. They can take this cheque and go to their bank and deposit in their bank account or simply exchange it for cash.
Here’s a sample of an ideal cheque.
As you can, there are various fields available on cheque to be filled out. Let’s take them one by one.
Date:
You start with writing date on the cheque. This is generally found on the top right side of the cheque.
Pay:
The one to whom you make the payment using a cheque is called a payee. So, the pay field is filled by the name of the payee. or rather you can say, the name on the cheque is of the payee. The payee could be anyone. A person, a company, an institute etc. Therefore, you can write out a cheque to any legal person or an entity. While you write the payee’s name, please cultivate the practice of writing the full name in legible handwriting.
Sum/Amount:
Here you have to put the amount that you are paying out. Both in words and figures. The longer field is meant for writing the amount in words. The small box on the right of the words field is for writing the amount in figures/numbers.
For example, if I want to pay Mr. X a sum of Rs. 1000/-. Then I would write it in words and in figures both.
Words: Rupees One Thousand Only. Figures: Rs. 1000/-
Account Number:
These days you will find that the account number is preprinted. So you need not worry about writing anything here. But in case, you find the blank space here, you need to write your bank account number. Not the account number of the payee.
Sign Above/ Signature:
Here you have to put your signature. You should sign the exact same way you have signed in the application form at the time of opening your bank account. The bank will reject your cheque from payment if the signature on the account is not properly matching. You will find the space for signing right at the bottom on the right side of the cheque.
So, these are the 5 basic information every bank cheque needs to have. These should be properly filled in a legible handwriting without leave any of the spaces blank.
Now, let’s learn about how to write the bank cheques so that they are not refused or delayed for payment. As the cheques would directly debit the account of the person who is issuing them, they are properly scrutinized before the payment. And any minor ambiguity may lead to decline of the payment.
So, here are few things that you should remember while writing cheques.
- The Cheques can be written to a payee whose bank account may not necessarily be in the same bank. For example, if your bank account is in ABC bank, the payee may have an account in ABC, DEF or GHI bank. It’s perfectly all right. The cheque can also be written to someone in a different city or state. But not to someone in a different country. Technically, you may but that cheque may become practically non-cashable due to various rules and regulations of different countries. So, avoid doing that! There are faster ways to deliver money to someone sitting in a different country.
- Though there are various forms of making payments are available these days but making cheque payments is still a preferred mode of payments for many types of transactions. You will mostly find the small business owners using the cheques often. The most common reason why people use cheques apart from convention is that it helps you to create a physical imprint of a financial commitment.
- When someone is writing a cheque to you, it means that the other person can verify at a later date how much and when the payment was made to you. The cheques can also be written postdated. Post dated cheques are those cheques that are written with a future date or sometimes left undated. Such cheques are a testimony to the fact that a financial transaction has taken place which may be honorable at a later date. So, this is one major convenience the small business openers find by paying through cheques.
