A cheque is an authorization to draw funds from a bank account. In order to do this, a cheque must state the name of the payee, the amount to be paid, and the date. A cheque is one of the more common forms of payment used, though its usage has declined as various types of electronic payment have gained in popularity.
A cheque is typically written to authorize payment to a specific entity, known as the payee. However a cheque can also be written to cash, which means that payment will be made by the bank to whomever presents the cheque. The routing of a cheque is as follows:
- From the payer to the payee.
- From the payee to the bank of the payee.
- From the bank of the payee to the bank of the payer.
- The bank of the payer sends funds to the bank of the payee.
- The bank of the payee makes the funds available to the payee.
A cheque is usually negotiable, so that the payee can assign it to another person by endorsing it. The person to whom the cheque is assigned becomes the new payee.
A cheque may contain a number of integrated security features that make it more difficult for a forger to alter the information already stated on the document.
Another term for a cheque is a check.