Cheque - Parts of A Cheque

Parts of A Cheque

The four main items on a cheque are

• Drawer, the person or entity who makes the cheque
• Payee, the recipient of the money
• Drawee, the bank or other financial institution where the cheque can be presented for payment
• Amount, the currency amount

As cheque usage increased during the 19th and 20th centuries additional items were added to increase security or to make processing easier for the bank or financial institution. A signature of the drawer was required to authorise the cheque and this is the main way to authenticate the cheque. Second it became customary to write the amount in words as well as in numbers to avoid mistakes and make it harder to fraudulently alter the amount after the cheque had been written. It is not a legal requirement to write down the amount in words, although some banks will refuse to accept cheques that do not have the amount in both numbers and words.

An issue date was added, and cheques may not be valid a certain amount of time after issue. In the US and Canada a cheque is typically valid for six months after the date of issue, after which it is a stale-dated cheque, but this depends on where the cheque is drawn; in Australia this is typically fifteen months. A cheque that has an issue date in the future, a post-dated cheque, may not be able to be presented until that date has passed, writing a post dated cheque may simply be ignored or is illegal in some countries. Conversely, an antedated cheque has an issue date in the past.

A cheque number was added and cheque books were issued so that cheque numbers were sequential. This allowed for some basic fraud detection by banks and made sure one cheque was not presented twice.

In some countries such as the US, cheques contain a memo line where the purpose of the cheque can be indicated as a convenience without affecting the official parts of the cheque. In the United Kingdom this is not available and such notes are sometimes written on the reverse side of the cheque.

In the US, at the top (when cheque oriented vertically) of the reverse side of the cheque, there are usually one or more blank lines labelled something like "Endorse here".

Starting in the 1960s machine readable routing and account information was added to the bottom of cheques in MICR format. This allowed automated sorting and routing of cheques between banks and led to automated central clearing facilities. The information provided at the bottom of the cheque is country specific and is driven by each country's cheque clearing system. This meant that the payee no longer had to go to the bank that issued the cheque, instead they could deposit it at their own bank or any other banks and the cheque would be routed back to the originating bank and funds transferred to their own bank account.

For additional protection, a cheque can be crossed so that funds must be paid into a bank account in the name of the payee. The format and wording varies from country to country, but generally two parallel lines and/or the words 'Account Payee' or similar may be placed either vertically across the cheque or in the top left hand corner. In addition the words 'or bearer' must be not be used or crossed out on the payee line.