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 1checks 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 savings accounts and other types of accounts 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 checkschecks 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 2modern 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 3credit 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 checkwhile 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 4there 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 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 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 5types of checksin 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 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 from which it is drawn at which time the bank will ascertain its authenticity with the payor 6a cashier s check is guaranteed by the banking institution and signed by a bank cashier which means the bank is responsible for paying the funds this type of check is often required for large transactions such as buying a car or house 7another 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 8bounced checks