CHEQUE

cheque or check is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified demand account held in the maker/depositor's name with that institution. Both the maker and payee may be natural persons or legal entities. A cheque is generally valid indefinitely or for six months after the date of issue unless otherwise indicated; this varies depending on where the cheque is drawn In Australia, for example, it is fifteen months Legal amount (amount in words) is also highly recommended but not strictly required.

In the USA and some other countries, cheques contain a memo line where the purpose of the cheque can be indicated as a convenience without affecting the official parts of the cheque. This is not used in Britain where such notes are often written on the reverse side.In the USA, at the top (when cheque oriented vertically) of the reverse side of the cheque, there are usually one or more blank lines lParties to regular cheques generally include a maker or drawer, the depositor writing a cheque; a drawee, the financial institution where the cheque can be presented for payment; and a payee, the entity to whom the maker issues the cheque. The drawer drafts or draws a cheque, which is also called cutting a cheque, especially in the United States. There may also be a beneficiary – for example, in depositing a check with a custodian of a brokerage account, the payee will be the custodian, but the check may be marked F/B/O ("for the benefit of") the beneficiary.

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 cheque will typically deposit it in an account at the payee's bank, and have the bank process the cheque. In some cases, the payee will take the cheque to a branch of the drawee bank, and cash the cheque there. If a cheque is refused at the drawee bank (or the drawee bank returns the cheque to the bank that it was deposited at) because there are insufficient funds for the cheque to clear, it is said that the cheque has bounced. Once a cheque is approved and all appropriate accounts involved have been credited, the cheque is stamped with some kind of cancellation mark, such as a "paid" stamp. The cheque is now a cancelled cheque. Cancelled cheques are placed in the account holder's file. The account holder can request a copy of a cancelled cheque as proof of a payment. This is known as the cheque clearing cycle.

Cheques are losing favour as they can be lost or go astray within the cycle, or be delayed if further verification is needed in the case of suspected fraud. A cheque may thus bounce some time after it has been deposited.Following a report by a working group of the Office of Fair Trading in 2006 maximum times for the cheque clearing cycle for most banks will be introduced in UK from November 2007.