Cheque : Usage

Parties to regular cheques generally include a maker or drawer, the depositor writing a cheque; a drawee, the financial institution where the cheque can be presented for payment; and a payee, the entity to whom the maker issues the cheque. Ultimately there is also at least one endorsee which would typically be the financial institution servicing the payee's account, or in some circumstances may be a third party to whom the payee owes or wishes to give money.

A payee that accepts a cheque will typically deposit it in an account at the payee's bank, and have the bank process the cheque. In some cases, the payee will take the cheque to a branch of the drawee bank, and cash the cheque there. If a cheque is refused at the drawee bank (or the drawee bank returns the cheque to the bank that it was deposited at) because there are insufficient funds for the cheque to clear, it is said that the cheque has bounced.

When a maker directs the maker's bank to deduct the funds for the amount of a cheque from the maker's account, thus guaranteeing funds will be available for the cheque to clear, and the bank indicates this fact by making a notation on the face of the cheque (technically called an acceptance), the instrument is then referred to as a certified cheque.

In Europe, a drawer may present a cheque guarantee card with the cheque when paying a retailer. If the retailer writes the card number on the back of the cheque, the cheque was signed in the retailer's presence, and the retailer verifies the signature on the cheque against the signature on the card, then the cheque cannot be cancelled and payment cannot be refused.

A cheque used to pay wages due is referred to as a payroll cheque. Payroll cheques issued by the military to soldiers, or by some other government entities to their employees, beneficiants, and creditors, are referred to as warrants.

Paper cheques have a major advantage to the maker over debit card transactions in that the maker's bank will release the money several days later.

Paying with a cheque and making a deposit before it clears the maker's bank is called "kiting" and is generally illegal in the United States, but rarely enforced unless the maker uses multiple checking accounts with multiple institutions to increase the delay or to steal the funds.