Check: What It Is, How Bank Checks Work, and How to Write One


Investopedia / NoNo Flores

What Is a Check?

A check is a written, dated, and signed draft that directs a bank to pay a specific sum of money to the bearer. The person or entity writing the check is known as the payor or drawer, while the person to whom the check is written is the payee. The drawee, on the other hand, is the bank on which the check is drawn.

Key Takeaways

  • A check is a written, dated, and signed draft that directs a bank to pay a specific sum of money to the bearer. 
  • Checks instruct a financial institution to transfer funds from the payor’s account to the payee or that person's account. 
  • Check features include the date, the payee line, the amount of the check, the payor’s endorsement, and a memo line.
  • Types of checks include certified checks, cashier’s checks, and payroll checks, also called paychecks.
  • In some countries, such as Canada and England, the spelling used is “cheque.”

How Checks Work

A check is a bill of exchange or document that guarantees a certain amount of money. It is printed for the drawing bank to provide to an account holder (the payor) to use. The payor writes the check and gives it to the payee, who then takes it to their bank for cash or to deposit into an account.

Checks essentially provide a way to instruct the bank to transfer funds from the payor’s account to the payee or the payee’s account.

The use of checks allows two or more parties to make a monetary transaction without using physical currency. Instead, the amount for which the check is written is a substitute for physical currency of the same amount.

Checks are generally written against a checking account, but they can also be used to move funds from a savings or other type of account.

Checks can be used to make bill payments, as gifts, or to transfer sums between two people or entities. They are generally seen as a more secure way of transferring money than cash, especially with large sums. If a check is lost or stolen, a third party is not able to cash it, as the payee is the only one who can negotiate the check.

Modern financial tools that work similarly to checks in that they provide a substitute for physical currency include: debit and credit cards, money orders, wire transfers, and internet banking.

History of Checks

Checks have been in existence in one form or another since ancient times. Many people believe a type of check was used among the ancient Romans.

Modern checks, as we know them today, became popular in the 20th century. Check usage surged in the 1950s as the check process became automated and machines were able to sort and clear checks. Check cards, first created in the 1960s, were the precursors to today’s debit cards.

Credit and debit cards—and other forms of electronic payment—have since overshadowed checks as the dominant means of paying for most goods and services. Checks are now somewhat uncommon but still occasionally used.

Features of a Check

While not all checks look alike, they generally share the same key features. The name and contact information of the person writing the check is located at the top left. The name of the bank that holds the drawer’s account appears on the check as well.

There are a number of lines that need to be filled in by the payor:

  • The date must be written on the line in the top right corner of the check.
  • The payee’s name goes on the first line in the center of the check. This is indicated by the phrase "Pay to the Order Of."
  • The amount of the check in a dollar figure is filled out in the box next to the payee’s name.
  • The amount written out in words goes on the line below the payee’s name.
  • The payor signs the check on the line at the bottom right corner of the check. The check must be signed to be considered valid.

There is also a memo line in the bottom left corner of the check. The payor may use it to make notes, such as a reference number, an account number, or any particular reason for writing the check.

A series of coded numbers is found along the bottom edge of the check, directly underneath the memo line and extending toward the payor’s signature line. These numbers are:

  • the bank’s routing number
  • the payor’s account number
  • the check number

In certain countries, such as Canada, the routing number is replaced with an institution number—which represents the bank’s identifying code—and the transit or branch number where the account is held.

Image by Sabrina Jiang © Investopedia 2020

The back of the check has an endorsement line for the payee’s signature when they are cashing or depositing the check. The receiving bank often stamps the back with a deposit stamp at the time it is deposited or cashed, after which it goes for clearing. Once the drawing bank receives the check, it is stamped again and filed. In some cases the check is sent back to the payor.

The oldest surviving American checkbook, from the Bank of New York, dates to the 1790s.

Types of Checks

In addition to the standard personal check, types of checks include certified checks, cashier's checks, and payroll checks, which are all used for different purposes.

Certified Check

A certified check verifies that the drawer’s account has enough funds to honor the amount of the check. In other words, the check is guaranteed not to bounce. To certify a check, it must be presented at the bank on which it is drawn, at which time the bank will ascertain its authenticity with the payor.

Cashier's Check

A cashier’s check is guaranteed by the banking institution and signed by a bank cashier, which means the bank is responsible for the funds. This type of check is often required for large transactions, such as buying a car or house.

Payroll Check

Another type is a payroll check, or paycheck, which an employer issues to compensate an employee for their work. In recent years, physical paychecks have given way to direct deposit systems and other forms of electronic transfer.

Bounced Checks

When someone writes a check for an amount larger than what is held in their checking account, the check cannot be negotiated. This is referred to as a bounced check.

The check bounces because it cannot be processed, as there are insufficient or non-sufficient funds (NSF) in the account (the two terms are interchangeable). A bounced check usually results in a penalty fee for the payor. In some cases, the payee is also charged a fee.

Other checking account fees can include a monthly service fee, a per-check fee (a charge for every check you write), a check printing fee, and returned deposit item fee. A returned deposit item fee is a fee charged when you deposit a check in your account that bounces.

Do Banks Forgive Bounced Checks?

Banks have different policies on bounced checks. Oftentimes, a bank charges overdraft fees or nonsufficient funds fees on bounced checks. Some banks may provide a grace period, such as 24 hours, in which time you can deposit funds to avoid the overdraft fees.

Do Cashier's Checks Clear Immediately?

Typically, funds from a deposited cashier's check must be available the next business day. However, a bank may place a hold on some of those funds if the check exceeds $5,252. It can also place a hold on the entire amount if it has a reason to believe the check will not clear.

What Is the Difference Between a Certified and Cashier's Check?

Both a certified check and a cashier's check are considered more secure checks than personal checks. Cashier's checks are signed by banks and drawn against a bank's account, while certified checks are signed by an individual and drawn against a personal account. Both checks are guaranteed by the bank, which makes them more secure.

The Bottom Line

Checks are a useful financial tool that makes payments and money transfers more convenient and potentially safer than cash. Different checks are designed for different purposes and for different risk levels. Learning how to use a check correctly can provide you with a secure payment method that you may need or prefer to use in certain circumstances.

Article Sources
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  2. Federal Reserve Bank of New York. "Historical Echoes: Cash or Credit? Payments and Finance in Ancient Rome."

  3. Federal Reserve Bank of Atlanta. "Economic Review: The Evolution of the Check as a Means of Payment: A Historical Survey," Pages 19-20.

  4. Oregon State University. "Information Regarding Personal Checks."

  5. Rare Book Buyer. "Newly Discovered Oldest Surviving American Checkbook."

  6. Consumer Financial Protection Bureau. "I Deposited a USPS Money Order, Cashier's Check, Certified Check, or Teller's Check. When Can I Access This Money?

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  10. The Huntington National Bank. "24-Hour Grace."

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