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Everything You Need to Know About Bank Checks

Mohammad Khan Yusufzai is Masters in Management, specializing in Economics, Finance and Marketing, with corporate & lectureship exp.


What are Bank Checks?

A check is a formal written document with the date of issue and signature of the account holder, directing the bank to pay a certain sum of money to the holder of the check or to deposit it into the account of the payee. Simply put, a check is an official document instructing your bank to pay money from your account to someone else on your behalf.

Common Terms Involved in a Bank Transaction:

The person who writes the check (or the one who will pay the money) is the drawer or payor, whereas the person to whom the check intends to pay is called the payee.

A Bank is the Drawee on which the check is drawn or being instructed to pay to the payee.

Basic Elements of a Check

There are some basic elements common to all the checks irrespective of what banks they are from.

  1. Payer Name and address section provides details about the account owner, who is the one paying money, and his address registered with the bank.
  2. Payee Name designates who can receive the money from the check. It can be paid to the holder of the check or deposited into the account of the payee.
  3. Amount in words is written out in this section using words instead of numbers to cross verify the amount.
  4. Bank Information including bank name, address, and/or logo is usually printed on the check.
  5. The memo line is a space allotted for any notes about the purpose of the payment. For example, to pay rent.
  6. The Bank Routing number American Bankers Association (ABA) routing number tells banks where they can get the funds for the amount mentioned in the check. In other words, it links your check to your bank account.
  7. Account number at your bank is another identifier that is used by the recipients to identify where the money for the check will come from.
  8. Check number is printed at two places in a check. This is a security measure to identify each payment made through checks and prevent any fraud.
  9. Date, also known as issuing date serves as a timestamp for the check. All checks have issuing date and usually, at the end of 6 months from this date, a check becomes stale.
  10. The dollar box displays the amount being paid in numbers. Value in the Dollar box and the written amount must be the same.
  11. Payer’s Signature verifies that the account owner has approved the payment. This signature should match the signature with the Bank’s records of the payor.

How does a bank check system work?

Banks follow a predefined check clearing process to complete a transaction made through a check. This process starts with the payee depositing the check into his bank and ends with the amount mentioned being debited from the payor’s bank account and ends with the same amount being credited into the payee’s bank account.


Let’s try to understand it with the help of an example:

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  1. Mr. John paid rent to Mrs. Tyler by writing a check of $100 out of his bank account with Standard Chartered Bank.
  2. Mrs. Tyler presented this check to her bank, Bank of America. In this case, Bank of America is the presenting bank. Presenting Bank, after verifying the amount and authenticity of the check, accepted it.
  3. Bank of America then processed the check and then sent it to Clearance House for approval.
  4. A scanner, or some other reader/sorter computerized machine, is used to process the information that is magnetically printed on the checks, including routing number, account number, and check number.
  5. After validating the information with the check, finally, $100 is debited from the account of Mr. John and credited to the account of Mrs. Tyler.

[ Did you know that you can print your checks at the comfort of your home, on blank papers with your home printer (without MICR printer or check papers)? Platforms such as Online Checkwriter and Checkeeper provides all the features of checks in digital format and are gaining quite some popularity among businesses. ]

Why you should start using checks?

Checks come with some great features which are unique to them. If you have not used checks till now, then you should consider this great personal payment method.

  1. Safety: First and foremost, Checks are one of the safest forms of payment option. They are traceable and cannot be quickly cashed by anyone. So they are unattractive to thieves. Secondly, checks are easier and safer to mail than sending cash inside an envelope.
  2. Verifiable: When a check is presented for payment in a bank, the bank makes a copy of it so that it can be easily proven that the payment has been made. All the information required to prove payment is also written on the check itself.
  3. Traceable: Payments made via check are traceable. Checks cannot be just cashed out by anyone at any random store. Checks also do not get deposited immediately, which provides an additional layer of security in case of any attempted fraud.
  4. Professional form of payment: Checks are widely regarded as a professional form of payment. All the businesses and corporations use checks to pay their employees and vendors because of their safety and verifiability.
  5. Customizable: There are various ways in which a check can be customized. You can add photos of yourselves or your loved ones, add some scenic views or add your favorite flowers.
  6. Business Checks: Customization becomes more important for small businesses as they can add their business logo, name, and address of their business on their checks. This looks more professional and it indicates that the payment is done by a business entity.

Dishonored checks

Dishonored checks

These are the checks that a bank on which it is drawn declines to pay (or to honor the check). There are several reasons why a bank would not accept to honor a check, with non-sufficient funds (NSF) being the biggest reason.


Most Common Reasons for Dishonoring of a Check

A majority of times a Check may be dishonored by a bank or any other financial institution because there are insufficient funds in the account to clear the check. Other than this, a check may be dishonored due to the following reasons:

  • the account holder has instructed the bank not to process the check,
  • the account is frozen, i.e. funds cannot be moved from it,
  • the account mentioned in the check does not exist,
  • check is presented after the expiration period permitted by law,
  • the signature on the check does not match with the signature on the file of the account holder or an authorized signatory on the account, or
  • the check is damaged, torn or, overwritten.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2021 Mohammad Khan Yusufzai

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