What is a Check?

A check is an authorization to draw funds from a bank account. In order to do this, a check must state the name of the payee, the amount to be paid, and the date. The format of a sample check appears in the following exhibit.

A check is usually negotiable, so that the payee can assign it to another person by endorsing it. The person to whom the check is assigned becomes the new payee. The use of checks allows two parties to a transaction to engage in a monetary transaction without physically exchanging any currency. There are several variations on the check concept, as noted below. The use of checks has declined as electronic forms of payment, such as ACH payments and wire transfers, have increased.

Cashier’s check. When a payment is made via a cashier’s check, the bank is responsible for the payment of funds. To minimize its risk, the bank ensures that it has obtained the payor’s funds before issuing the check.
Certified check. When a payment is made via a certified check, the bank guarantees that the drawer’s account has sufficient funds in it to keep the check from bouncing. The bank charges a fee for this service.
Payroll check. A payroll check payment is intended to compensate employees for their work. It is typically drawn on a payroll-specific bank account.

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FAQs

How Long is a Check Valid for Deposit?

A check is generally considered valid for deposit for up to six months from the date of issuance. After six months, it becomes stale-dated, and banks are not required to honor it, although some may choose to do so at their discretion. For certain instruments, such as U.S. Treasury checks or certified checks, longer validity periods may apply under specific regulations.