cheques

Cheques are negotiable instruments that order a bank to pay a specified amount from the account holder's funds to the named payee or bearer. They are drawn on a bank and require the signature of the drawer, the date, the amount in numbers and words, and the name of the payee. Common features include the payee line, the MICR line on the bottom for processing, and the possibility of crossings for banker’s use only.

Processing occurs when the payee presents the cheque for payment or it is transmitted through the clearing system. The bank verifies the drawer's account balance, checks the signature, and ensures the cheque is not stale (older than a certain period). If funds are available, payment is authorized and debited to the drawer's account; otherwise it may be dishonored.

Types include open cheques, bearer cheques, crossed cheques, post-dated cheques, and stale cheques; banks may impose limits and security features to prevent fraud. Fraud risks include forgery, alteration, counterfeit instruments, and cheque kiting; modern safeguards include cheque imaging, positive pay, and truncation.

History: cheques evolved from promissory notes and bills of exchange and became widely used in commercial payments from the 19th to late 20th century. With the rise of electronic funds transfer and card payments, their use has declined in many jurisdictions but they remain in use in some regions and for certain transactions.

Legal framework varies by country but cheques are generally governed as negotiable instruments, with rules on endorsement, transfer, and dishonor. See also bank draft and electronic funds transfer.