Cheque is a very popular traditional banking instrument that is widely used as a means of payment for good and services.
THe Wikipedia defines it as “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”
Here are some of the reason why your instrument may be returned unpaid
The single most important authentication for withdrawal from a customer’s account is the customer’s signature. If the customer’s signature is missing or not the same as the one in the bank’s record, the instrument may be returned unpaid. It is thus very important for the bank customer to approach the bank to update his record if there is any change.
2. Post dated
A post dated instrument will not be paid even if it is a mistake and presented by the account owner, the date will have to be changed and endorsed before it is paid. Post dating a cheque will ordinarily mean the account owner does not want the beneficiary of the cheque to have instant value. Such cheque will have to be presented on the date specified on it before it is given value.
3. Stale Instrument
It takes a period of 6 months from the date an instrument is issued before it becomes stale. A stale instrument will not be given value unless revalidated. A new cheque will have to be issued in favor of beneficiary if the stale instrument could not be revalidated and endorsed by the account holder and/or signatory/ies to the account.
4.Amount in words differ from amount in figures
The amount written in words on an instrument must be same with amount written in figure. Disparity in these two line could make your bank return your cheque unpaid. Changes on the cheque must however be endorsed by the account holder and/or signatory/ies to the account.
5.Open / Crossed Instrument
A crossed instrument cannot be cashed across the counter. It can only be paid into the account of the beneficiary while an open instrument can either be cashed across the counter in a bank or paid into the account of beneficiary.
For an instrument to be given value, all security features on it must be visible and verifiable. A damaged instrument may still be paid if all the security features are still visible otherwise it will be returned unpaid. Of utmost important is the number which is used to pass the cheque in the customer’s account. If the number is no longer visible,it may not be paid even if presented by the account owner.
Another important reason your instrument may not be paid is when the beneficiary fails to provide a valid identification. The beneficiary must provide valid identification to proof that he or she is the actual person in whose favor the instrument was written otherwise the owner of the account must take responsibility by instructing the bank to pay without identification.
A cheque drawn on a frozen account may be returned unpaid. Account may be frozen because of the following reasons: regulatory, such as BVN and data update (KYC); Debt recovery; Dormancy and request by security agencies like EFCC and the Police. A frozen account may be allowed to receive cash lodgment but drawings may be denied.
And lastly, for you to have written a cheque you must have enough fund in your account to support the amount you have instructed the bank to pay on your behalf. Your instrument will not be paid if your account is not funded to cover the amount you have written unless you have existing arrangement with your bank in form of overdraft.
It is important to note that honoring a customer’s instrument largely depends on the customer’s relationship with the bank. A genuine mistake on a cheque may be ignored for some customers upon confirmation of same on phone while it may not be ignored for some other customer