No-one is quite sure when banks first started using checks. Some believe that it may have begun in Roman times, others that the origins were in Holland in the 16th century. But whenever they were first introduced it seems quite incredible that they are still exactly the same in principle today as they have always been.
At its most basic level, a check is just a piece of signed paper that forms an agreement for the payment of a certain amount from one bank account to another. And, while online banking is starting to take more and more of a hold, there are still many situations where checks are still being used, including these five examples.
- Personal check. This is by far the most common type of check that you’ll come across. Generally, they are used by individuals for paying all kinds of expenses like rent, shopping, garage bills, or even to pay back friends money that is owed to them. When they are made out to “Self” they can also be used to withdraw money from a person’s own bank. There is a risk, when accepting a personal check for payment, that the person issuing might not have enough money in their account for the bank to honour it. When this happens, it is described as being a “bounced” cheque as the bank will bounce it back to the payee.
Within personal checks there are also variations. For instance, personal checks can be “open” in which case it can be cashed at any bank by anyone holding it or “crossed” which are only for the person named on the check.
- Certified check. There is no chance of a certified check bouncing as, to be issued, it has to have been verified by the issuing bank to be genuine and have enough funds in the bank account to pay it. Because of its verified nature, this kind of cheque is usually used to make sizable payments, for example for settling a tax bill or making insurance payments. It can also be used to pay a deposit on a rental property or pay off a loan. To be certified, it must be issued by the bank in question and come with a certification seal. It will also have the account number on the check so the bank can track the money.
- Voucher Check. Usually, a voucher check is used for a business to pay its employees or even its creditors and other suppliers. In actual fact this is a check that comes with not just one, but two vouchers attached to it, each showing the same information. On the voucher it can list amounts such as tax deducted or contributions to a pension. The issuer keeps one of these vouchers and the recipient removes the other before cashing the check or paying it into their checking account. Most voucher checks also have a number of security features built in such as a tamper-proof coating on the paper and security holograms to prove that it is genuine.
- Traveller’s Check. These are issued to travellers in their home country before they travel abroad to somewhere that uses a different currency. They are bought for their face value and can then be exchanged for the currency in question at a bank or a bureau de change. These are one of the safest ways to take money abroad because if they are lost or stolen the issuing bank will refund the holder with that particular amount of money.
- E-check. Sometimes also called an Automatic Clearing House transfer, this is a payment form that is gradually gaining more favour with businesses, particularly online. Quicker to process than paper checks, they can be used with debit or credit cards and generally don’t include the fees that the latter can sometimes charge. They can be used with both personal and business accounts.
So checks might have a very long history, but they also seem to have quite a future ahead of them too. And that’s got to be good news for businesses and individuals alike.
Certified Checks
This is a type that is guaranteed to have sufficient funds in the issuer’s account to cover the payment amount. This guarantee is done by requiring the issuer to present a bank guarantee before issuance. They are written just like regular ones, with the payer’s name on it, along with the bank’s name and address, account number, and check number.
The main difference between them is that the former does not come with any assurance from a bank that funds are available. On the other hand, when you make a certified check payment, you can rest assured that the funds being paid out will be collected by your financial institution since they have verified its validity prior to its submission. This can be an especially important benefit when dealing with large sums of money such as payments for real estate transactions or business purchases.
While providing additional security and reassurance regarding payment clearance, certified checks also help clear these payments faster than traditional means of transferring funds since they are usually sent electronically via banks or other financial institutions.
Conclusion
They remain one of the most secure methods for conducting financial transactions. These documents are designed to be tough and eliminate potential threats from scammers and hackers.
The various types that can be created should be monitored by businesses and account holders in order to better understand their functions. The handling of funds, orders, and payments represents the essence of business operations in many industries, making it important to differentiate between types of checks and create safeguards against fraud or misuse.
By understanding the different kinds that can exist, it is easier to assess risk while actively preparing for any issues before they arise. They remain one of the cornerstones of global commerce today thanks to their secure nature and their ease-of-use. Checking accounts are invaluable tools in business operations, so make sure you stay informed about these documents!
