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Cheques

or if you prefer, Checks : money that you write


Cheques (or "checks" in the USA) are a form of payment which is safer than credit cards and less of a security problem than cash. If you want to pay someone, you can write them a cheque. On traditional cheque-books, this involved using a pen and writing on the pre-printed forms a few things such as the name of the person to whom the payment should be made, the amount (traditionally in words as well as in figures), the date, and personal signature. The person receiving the cheque could pay it into their bank, and then the banks would move money from one account to another to make the payment complete.

Whereas banknotes are promissory notes made by the country's Exchequer to "the bearer" (ie whoever has possession of the banknotes), cheques are notes of instruction to banks requesting them to transfer money to the payee (ie whomever the cheque has been written to).

Cheques have various advantages over cash:

* You can write out a cheque for any amount, so for example if you're buying a house you can write a cheque for the entire agreed price and hand it to the vendor. This is so much easier and safer than wheeling cash around.

* Cheques can be sent in the post, and in the unlikely event that they are intercepted, they're not much good to criminals as they are made out to the payee. The fraud of pretending to be the payee is relatively easy for banks to track.

* If you've not got your chequebook with you, you can still write a cheque! It may seem strange, but it's true: Cheques don't have to be written on the official forms, and you can write your own cheque on just about anything. Just a piece of paper with the right things on, signed, counts as a cheque, and the recipient can pay it into a bank account (although recently banks have been levying a charge for such unorthodox behaviour; it used to be 1.50 per non-standard cheque). People were writing cheques on paving slabs, rubber balls, and in one notorious case a cow.

* Instead of all being about the same in the kind of way banknotes tend to be, cheques can be customised. British highstreet banks made available chequebooks which were standard, or with more cheques than standard, or with the book being left-handed, or in Cymraeg (Welsh). Now on an international level, companies are starting to make available custom cheque books. A good place to get your custom cheques/checks is Checks Unlimited. It's very snazzy having these things made to your own style.

* If you make a mistake and it turns out that you have written a cheque to someone and it's wrong (for example where you've bought something and it is found to be bogus), you can sometimes undo the payment by stopping the cheque. There's a charge for that, but it's actually possible, whereas with cash, you might as well whistle for it.

If you are paid a sum of money by cheque, you pay the cheque into your bank account. There's then a delay before you get the money appearing in your account. The cheque has to be "cleared". That is, the banks have to put the cheques through a "clearing house" to work out which money is going where. In the age of Internet data transfer, you'd expect this would take a few milliseconds, but oddly it still took three days even in 2010. This has got to improve, and I've heard there is one European country where banks have to clear cheques within a few hours.

If a cheque fails to clear, either because the person writing the cheque has made some mistakes, or because they haven't got enough money in their bank account, the cheque is said to "bounce". The reason it's called "bouncing" is because the bank would usually assume it's just a temporary problem and would present the cheque again. And again, to give it a third chance. But then they'd fail it. Bouncing a cheque is very bad and is considered a disgrace. It is often considered to mean the person writing the cheque is not of sound finances, although this is not always the case. A while ago it was a curious tradition that any cheques that bounced were put up on a display board for customers to inspect. However, in the UK this practice was outlawed as it could in theory at least mean that someone who'd just made a silly mistake was held up to scorn as a bad payer when in fact they'd just failed to move the money in time to cover the cheques they'd written. This can be the case even with honest people writing cheques.

Be very wary about cheques you receive were there's any chance the cheques are from a stolen chequebook. It's a problem, because of the danger that stolen cheques can clear. You might then think you have got the money, whereas in fact you haven't. In the case of stolen cheques, it is said that they never clear, at least not with any certainty. This whole dodgy matter is explained at the page of Cheque Scams. Note that it wasn't much of a problem before international small-time crooks of the type involved in the 419 Nigeria Scam etc. A way to save yourself from this type of thing is to be sure you can trust the person writing a cheque to you is honest. Another thing that can save you from the problem is where the cheque is guaranteed by the bank. A proper bank, that is. You know, the sort that's willing to stump-up the money if the transaction goes wrong.

How to Write a Cheque

It's a lesson taught in school, but if you set up a new bank account, your bank may also offer this tuition: How to write a cheque:

1. Before you start writing the cheque, think carefully and make sure you have the amount in your bank account, in your "cleared balance". Don't write cheques for amounts of money you haven't got.

2. Fill in the cheque-stub first. That way you can't accidentally end up giving away a cheque and later find you've forgotten what it was for. The cheque-stub keeps a record for you to see what cheques you have written.

3. Put in the date on the cheque. If it's January, double-check the year to make sure you've remembered it's a new year. (Sounds silly, but people have been known to put last year accidentally because they've been using that year... all year).

4. Put the amount of money the cheque is for in figures. Make sure there's no space inbetween the currency symbol and the figure, and put a clear decimal point or a dash inbetween the amount in pounds and pence, or between dollars and cents, etc. The idea is to do this in such a way that if someone wanted to tamper with the figure they'd fail to do so convincingly.

5. Write out the amount in words. This may seem a long and verbose measure, but it helps to avoid forgery and fakery. At the end you put the pennies, but if the main number is a whole number, you put the word "ONLY". That stops crooks putting extra things on the end like "thousand" etc. This is also why you use up any remaining space in the "amount in words" field with a line.

6. Finally, sign the cheque. Preferably do this with a flourish, and in an individualistic style such that no two signatures are identical. The signature may be neat or untidy, but it needs to be personal to you. That way, if you are asked later to say whether a signature is yours or whether it's fake, you can say with reasonable certainty which it is.

7. If you've made any mistakes and had to make corrections, sign them with your initials.

8. Double check the entire cheque to make sure it's all OK. The amount in figures has to be the same as the amount in words, and the date has to be about right.

Now although this all may take a reasonable proportion of a minute to complete, it is worth it. It never takes longer than a sensible time, even if the cheque is for millions. Plus, if you're an honest person, you can have the sincerity in knowing as you pass the cheque to the other person, that it's as good as cash. You have to have the amount of money in your account, but that's obvious. Also, watch out for people putting cheques behind the clock and paying them all in at once some time later.

Cheques moving into the Modern Age

It has been mooted by some banks that they intend to cease having cheques. This may sound well-intentioned, but it's not so good. The fact is, cheques are a much better way to transact money than using credit cards, or direct debit. Although there is a decent alternative, which is to transfer money from one account to another by bank transfer. In a way this is like a cheque except that you are talking with the people in the bank rather than writing them a note on a piece of paper.

Why should banks discontinue cheques? Maybe they assume that people are becoming illiterate and are unable to write out the amount in words? Or, maybe the banks consider most of their customers are either illiterate, untrustworthy, or penniless; in which case, maybe they should go upmarket?! Evolution suggests a moving forward, a progress, an improvement in the intellect of people, and scientific progress suggests an improvement in the wealth of the world. So, maybe if the banks have an idea their customers are going downhill, they need to update their opinions to keep going the same direction as the world.

I suggest that cheques should not be discontinued. They should be upgraded, so that you may still write a cheque with ink on a paper, but you may also write an electronic message which is the equivalent of a paper cheque. As with old-style cheques, this is still a message to your bank requesting them to pay someone you've nominated. However, with an e-cheque, you'd need to sign it using a cunningly designed identity which that could not be misused by authoritarian governments. Ie, no more ID Card nonsense! The identity needs to be generated by you and produced in such a way that it has samenesses and differences which are unique. That's what a signature is. Similarly with even older style signet rings and ceiling wax. You can generate it. Others can't copy it and cheat and pretend to be you, and evil authoritarian big-brother type systems can't use the identity to pin you down.

A helpful suggestion towards e-cheques that's been made, is to use a two-way PGP link and to verify the e-cheque by such an encrypted communication. This is good stuff and works in Linux

Another idea is for your e-cheque generator to generate a set of individual pseudo-random numbers to assign one to each e-cheque that you send. You can then send a copy of that number to your bank to verify that you intended to write the cheque.

An important point of any such system is that the identity of the recipient doesn't need to be complete. It just needs to match up to a reasonable extent. This helps so it's possible to make money transfers without any government being able to spy on everyone's financial affairs.

If any bank or other proper financial setup wishes to discuss ways to set up a cheque system in the modern age, please get in touch, and I'll see what can be arranged. The highstreet banks should be able to get consultations on these things and get a new e-cheque payment system set up that will wipe PayPal off the face of the earth. It is surprisingly slow of them not to have already started to set up proper e-payment systems, systems which are person-first security which protects the individual but denies the state authority the ability to poke around people's personal affairs. Also see open source Linux rather than proprietary Microsoft.