check

A check (borrowed from Persian چك Chek) is a document instructing a financial institution to pay a specific amount of a specific currency from a specific demand account held in the maker/depositor's name with that institution. Both the maker and payee may be natural persons or legal entities.

An order check – the most common form in the United States – is payable only to the named payee or his or her endorsee, as it usually contains the language "Pay to the order of (name)." A bearer check is payable to anyone who is in possession of the document, although such checks are often crossed a/c payee to restrict payment to the payee.

In the United States, the legal noun for a check varies with the type of financial institution on which it is drawn. In the case of a savings and loan it's a negotiable order of withdrawal; if a credit union it would be a share draft. Checks as such are associated with chartered commercial banks, but in common usage check is understood to mean any or all of these negotiable instruments. Parties to regular checks generally include a maker, the depositor writing a check; a drawee, the financial institution where the check can be presented for payment; and a payee, the entity to whom the maker issues the check. Ultimately there is also at least one endorsee which would typically be the financial institution servicing the payee's account, or in some circumstances may be a third party to whom the payee owes or wishes to give money.

A payee that accepts a check will typically deposit it in their account at their bank, and have the bank process the check. In some cases, the payee will take the check to a branch of the drawee bank, and cash the check there. If a check is refused at the drawee bank (or the drawee bank returns the check to the bank that it was deposited at) because there are insufficient funds for the check to clear, it is said that the check has bounced.

When a maker has their bank hold the funds for the amount of a check and guarantee funds will be available for the check to clear, it is referred to as a certified check.

A check used to pay wages due is referred to as a payroll check. Payroll checks issued by the military to soldiers, or by some other government entities to their employees, beneficiants, and creditors, are referred to as warrants.

When a check is designed to allow the person signing it to make an unconditional payment to someone else as a result of paying the account holder for that privilege, it is referred to as a travelers cheque. As travelers cheques can usually be replaced if lost or stolen, they are often used by people on vacation in place of cash. The use of credit cards has, however, rendered them less important than they previously were; there are few places that do not accept credit cards but do travelers cheques – in fact, nowadays, many places do not accept the latter.

A check sold by a post office or merchant such as a grocery for payment by a third party for a customer is referred to as a money order, in the UK they are called Postal orders.

A check issued by a bank on its own account for a customer for payment to a third party is called a cashier's check or a treasurer's check. Banks often sell money orders, and travelers cheques are usually purchased from banks.

Some public assistance programs such as Women, Infants, and Children or Aid to Families with Dependent Children make vouchers available to their beneficiaries, which are good up to a certain monetary amount for purchase of grocery items deemed eligible under the particular program. The voucher can be deposited like any other check by a participating supermarket or other approved business.

External link: Information on cheques in the UK from APACS