What Is a Check?

What Is a Check?

Let me explain what a check is: it's a written, dated, and signed document that instructs a bank to pay a specified amount from your account to someone else. As the person writing it, you're the payor or drawer, the recipient is the payee, and the bank handling it is the drawee.

Key Takeaways

You need to know that a check directs a bank to pay a specific sum to the bearer. It transfers funds from your account to the payee's. Features include the date, payee line, amount, your endorsement, and a memo line. Types cover certified checks, cashier’s checks, and payroll checks. In places like Canada and England, it's spelled 'cheque'.

How Checks Work

A check acts as a bill of exchange guaranteeing a certain amount of money. The bank prints it for you, the account holder, to use. You write it out and give it to the payee, who then cashes it or deposits it at their bank.

Essentially, you're instructing your bank to move funds from your account to the payee's. This allows transactions between parties without cash. The check substitutes for physical money of the same value.

You typically write checks from a checking account, but they can draw from savings or other accounts too. Use them for bill payments, gifts, or transfers. They're more secure than cash for large amounts—if lost or stolen, only the payee can cash it.

Fast Fact

Modern tools like debit cards, credit cards, money orders, wire transfers, and online banking work similarly by replacing physical currency.

History of Checks

Checks have existed since ancient times—some believe the Romans used a form of them. The modern version gained popularity in the 20th century. Usage spiked in the 1950s with automation for sorting and clearing. Check cards from the 1960s led to today's debit cards.

Now, credit and debit cards, plus electronic payments, have largely replaced checks. They're less common but still used occasionally.

Features of a Check

Not all checks look the same, but they share key parts. Your name and contact info go at the top left, along with your bank's name.

You fill in the date in the top right, the payee's name on the 'Pay to the Order Of' line, the numerical amount in the box, the amount in words below that, and your signature at the bottom right. Sign it to make it valid.

There's a memo line in the bottom left for notes like reference numbers or reasons for the check.

Coded numbers at the bottom include the bank's routing number, your account number, and the check number. In countries like Canada, it's an institution number and branch number instead.

The back has an endorsement line for the payee's signature when cashing or depositing. The bank stamps it during processing, and it gets filed or sometimes returned to you.

Fast Fact

The oldest surviving American checkbook, from the Bank of New York, dates to the 1790s.

Types of Checks

Beyond personal checks, there are certified checks, cashier's checks, and payroll checks, each for specific uses.

Certified Check

A certified check confirms your account has enough funds—it won't bounce. Present it at your bank for verification.

Cashier's Check

A cashier’s check is bank-guaranteed and signed by a cashier, so the bank pays. It's used for big buys like cars or houses.

Payroll Check

A payroll check, or paycheck, is what employers issue for work payment. These days, direct deposit is more common.

Bounced Checks

If you write a check for more than what's in your account, it bounces due to insufficient funds (NSF). You get a penalty fee, and sometimes the payee does too.

Other fees might include monthly service, per-check, printing, or returned deposit fees.

Frequently Asked Questions (FAQs)

Do banks forgive bounced checks? Policies vary—some charge overdraft or NSF fees, but might offer a grace period like 24 hours to deposit funds.

Do cashier's checks clear immediately? Funds are usually available next business day, but holds apply over $5,252 or if there's doubt about clearing.

What's the difference between certified and cashier's checks? Both are secure; cashier's are bank-signed against bank funds, certified are personal but bank-guaranteed.

The Bottom Line

Checks are a convenient, safer alternative to cash for payments and transfers. Different types suit various needs and risks. Learn to use them properly, including voiding, for secure transactions when needed.