Cheques have been around since the inception of banking, it had its origins in the ancient banking system in which bankers would issue orders at the request of their customers, to pay money to identified persons.
Such an order facilitates trade by eliminating the need for merchants to carry large quantities of currency (for example, gold) to purchase goods and services.
The Wikipedia defines Cheque as
“A cheque (or check in American English) is a document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued.
‘The person writing the cheque, the drawer, has a transaction banking account (often called a current, cheque, chequing or checking account) where their money is held.
‘The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the amount of money stated”.
A Cheque is a negotiating instrument that guarantees payment for goods and services now or at a later date. It is a written order instructing a bank to make payment to the person whose name is written on it.
A Cheque book contains Cheque leaflets of 25, 50, 100 or 200 lots
Terms of cheques
Bearer Cheque. When the word “or bearer” appears on the face of the Cheque it means the Cheque is payable to the person whose name is written on the Cheque or any other person that presented the Cheque for payment.
Order Cheque: When the word “or order” is written on the face of a Cheque it means the Cheque is payable to the person whose name is written on the Cheque or any other person to whom the payee has endorsed the Cheque to.
Crossed Cheque: When 2 parallel lines are drawn on the face of a Cheque with or without additional words. It means the Cheque cannot be cashed across the counter but can only be paid into the beneficiary account. Such Cheque can however be opened by signing between the lines then it can be cashed across the counter.
Post Dated Cheque: A post dated Cheque is a Cheque that bears a future date. Such Cheque can not be honored earlier than the date on the Cheque.
Stale Cheque: A Cheque that is presented six months after the date written on the Cheque. Such a Cheque cannot be honored by the bank.
Bounced Cheque: A Cheque that is returned for lack of funds in the account of the drawer. Such Cheque usually ended up as dishonored Cheque.
Inchoate Cheque: A Cheque issued without a date, amount or signature or the amount in words and figures disagreeing.
Other Types of Cheques
Manager’s Cheque, Bank Cheque or Bank Draft: Are cheque types that the issuing bank is guaranteeing its payment. The bank issue such Cheque at the instruction of customers whose account is debited immediately at the point of issuing such Cheque. The Cheque can be repurchased if no longer required.
Dividend Warrants: Are cheques issued by a public limited company addressed to its qualified shareholders for a share of profit.
Interest Warrants: Are cheque types issued by a public limited company addressed to qualified debenture holders for interest payment on debenture holdings.
Parties to a Cheque
Drawer: The account holder who issues the Cheque in favor of another party
Drawee: The bank on whom the Cheque is drawn. To whom the order to pay is addressed
Payee: The person who is to be paid or who is paid
Holder: The person entitled to possession of the Cheque and to receive the amount due.
Endorser: The person who has affixed his signature to the Cheque for negotiation.
Endorsee: The person whose name has been written on the Cheque to be paid.
Cheques, for many years has been the only alternative to cash as a means of payment for good and services in Nigeria. With the advent of electronic payment systems in recent years the use of cheque books have been reduced significantly as most businesses prefers electronic payment system because of its efficiency and timeliness.
Online and mobile banking transactions has also grown significantly in Nigeria putting stop to the continuous growth of the chequing system as a mean of settling financial transactions.
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