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Cheque

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A cheque is a negotiable instrument used to move money between people. It acts as a formal written order to a financial institution. This order instructs a bank, building society, or credit union to pay a specific amount. The money moves from a transaction account to a specific person or company. This person or company is called the payee. The person who writes the cheque is known as the drawer. They must have a current, chequing, or share draft account where the funds are held.

Sample cheque
Sample cheque

To function correctly, a cheque must contain several specific pieces of information. The drawer writes the monetary amount and the date on the document. They also name the payee and sign the cheque to authorize the payment. The bank that holds the money is called the drawee. Most cheques are order instruments, meaning they must be paid to the named payee. They are not generally payable to anyone who simply holds them. In the United States, a payee can endorse a cheque. This means they sign it to transfer the payment to a third party.

1933 South African cheque
1933 South African cheque

Cheques are a type of bill of exchange. These were developed to allow for trade without carrying heavy amounts of cash. Historically, merchants avoided carrying large quantities of gold or silver. This reduced the risks of theft during travel. Early versions of these instruments appeared in many ancient cultures. In India, the Maurya Empire used an instrument called an adesha between 321 and 185 BC. The ancient Romans used early forms called praescriptiones in the 1st century BC. By the third century AD, Persian banks issued letters of credit called čak.

As trade expanded, these paper orders became more sophisticated. In the 9th century, a merchant could cash a sakk in one country that was drawn on a bank in another. In the 13th century, Venice developed the bill of exchange for international trade. By the early 1500s, people in the Dutch Republic used cashiers to hold their money. These cashiers began paying money to anyone with a written order from a depositor. In the early 1600s, the Fula people in Senegambia used cheques valued in cattle. The herdsman acted as the bank where wealth was stored.

Jefferson, Thomas (signature on check)
Jefferson, Thomas (signature on check)

Modern banking changed the way cheques were produced and managed. In 1717, the Bank of England began using pre-printed forms on special cheque paper. This was done to prevent fraud. Around 1770, London banks began daily cheque clearing. Clerks met at a tavern called the Five Bells to exchange cheques and settle balances. This was the world's first bankers' clearing house. In the United States, the Bank of New York began issuing cheques in 1784. By 1830, the Bank of England introduced stitched cheque books containing 50, 100, or 200 forms.

English 1956 Westminster Bank cheque of Doris Ogilvie
English 1956 Westminster Bank cheque of Doris Ogilvie

Technology brought massive changes to cheque processing in the 20th century. In 1959, a standard for machine-readable characters, known as MICR, was patented in the US. This allowed machines to read and sort cheques automatically. Because of this automation, cheque volumes grew significantly. Usage peaked in or around the early 1990s, with billions of cheques issued annually. In 1969, cheque guarantee cards were introduced to help retailers confirm a signature. These cards helped ensure a cheque would be honored at the point of sale.

BritishChequeAnnotated
BritishChequeAnnotated

Today, the role of the cheque is changing rapidly. Many countries have phased out cheques entirely or made them a marginal system. Electronic payment systems like debit cards, credit cards, and mobile payments have become more popular. Some countries use cheque truncation to save time and costs. This process converts a physical cheque into an electronic form for transmission. This method eliminates the need to move the actual paper through the clearing house. As digital banking grows, the traditional paper cheque is becoming less common in the global economy.

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🖼️ Images & Media (9)
File:1933 South African cheque.jpg
1933 South African cheque.jpg
File:Barclays and Co. cheque. For 39 pounds, 4 shillings, and 2 pence. Issued in London by Messrs Barclay and Tritton, 1793. On display at the British Museum in London.jpg
Barclays and Co. cheque. For 39 pounds, 4...
File:English 1956 Westminster Bank cheque of Doris Ogilvie.jpg
English 1956 Westminster Bank cheque of...
File:BritishChequeAnnotated.png
BritishChequeAnnotated.png
File:Sweet success.jpg
Sweet success.jpg
File:110512-F-PO994-029 Annual Volunteer Recognition Ceremony 2011 Moody Air Force Base.jpg
110512-F-PO994-029 Annual Volunteer...
File:Ansari X-Prize Check.jpg
Ansari X-Prize Check.jpg
File:Sample cheque.jpeg
Sample cheque.jpeg
File:Jefferson, Thomas (signature on check).jpg
Jefferson, Thomas (signature on check).jpg
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