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​Understanding cheques

3 min. read

A cheque lets you make a payment from your bank account. Find out how it works and how to keep track of your money.

Key takeaways
  • Make sure you have sufficient funds in your account for the cheque amount.
  • Cross your cheques to ensure that only the payee can deposit it.
  • Record and track all your cheque transactions and tell the bank if there are discrepancies.

What is a cheque?

A cheque is a paper instrument that orders a payment of money from a bank account. When you write a cheque, you're the payer and the receiver of the cheque is the payee.

Cheques are generally valid for 6 months from the date written on the cheque unless a shorter period is otherwise stated on the cheque.

How long cheques take to clear

When you deposit a cheque into your account, your bank will send an image of the cheque to the payer’s bank. The purpose is to collect the cheque amount for crediting into your account. This process is called cheque clearing.

Cheque deposited on You'll receive your money on
Monday to Thursday (before cut-off time) The following business day (after 2pm)
Thursday (after cut-off time) Monday (after 2pm)
Friday (before cut-off time) Monday (after 2pm)
Friday (after cut-off time) Tuesday (after 2pm)
Saturday Tuesday (after 2pm)

Things to note:

  • Cheques are cleared from Mondays to Fridays only. Cheque deposit cut-off time is usually at 3.30pm
  • Cheques deposited on Saturdays and Sundays will be sent for cheque clearing on Mondays or the next business day
  • Cash cheques can be encashed on Saturdays at the payer's bank. A handling fee may apply

Writing a cheque

When writing a cheque, take note of the following:

Make sure you have sufficient funds

If you don't have enough money in your account, your cheque will be rejected. You may have to pay fees and charges, including:

  • Handling or administrative fee for the return of the cheque
  • Overdraft interest to cover the bank’s loss in overnight interest

Cross your cheque appropriately

For a payee only (non-transferable) cheque:

  1. Cross the cheque by drawing two parallel lines across the top left-hand corner of the cheque.
  2. Cancel “or bearer” on the cheque and add “Account Payee Only” (or “A/C Payee Only”).

Note: If the cheque is crossed with only two parallel lines but without cancelling “or bearer”, it can be deposited into anyone's bank account.

For a cash cheque:

  • Don't cross your cheque
  • Don't delete the words “or bearer” on the cheque
  • Don't add the words “Account Payee Only” (or “A/C Payee Only”)

Write the payee’s name clearly

Use dark permanent ink and cross out any extra space after the name by drawing a line.

Write the correct amount

  • Pen the amount in words and write “only” after that. Cross out any extra space by drawing a line
  • In the box, put in the amount in figures. It should be the same as the written amount
  • The decimal point must be clearly seen
  • Do not use a backslash (/) in place of the decimal point as it can be misread as “1”
  • Use a comma when writing large numbers, e.g. $10,000

Check all details before signing

  • Never pre-sign cheques.
  • Avoid using signatures that are simple and easily forged
  • If you alter your cheque, sign in full against the alteration
  • If there is more than one alteration, issue a new cheque to avoid confusion

Avoid writing post-dated cheques

Post-dated cheques cannot be cleared immediately. Processing charges will apply if the cheques are returned.

If you want to stop a payment

Tell your bank immediately. You can only stop payment of an issued cheque if it has not been cleared or cashed out. An administrative fee may be charged by the bank.

What if a cheque is returned unpaid?

If you are a payee...

You will not receive payment. Instead, your bank will send you an image return document (IRD) of the cheque and a Return Cheque Advice with instructions on whether you can present the IRD again to the same bank for clearing.

If you can't present the IRD for clearing, you should return the IRD to the payer and ask for a new cheque.

If you are a payer...

The cheque you wrote will not go through if you don't have enough money in your account. You will have to pay a handling or administrative fee for the return of the cheque and overdraft (OD) interest charges to cover the bank’s loss in overnight interest.

For example, if the payer writes a cheque for $1,200 when he has only $1,000 in his account, he will be charged overnight OD interest on $200 when the cheque is presented.

Note: The payer’s account will automatically go into OD due to insufficient funds, regardless of whether he has a pre-arranged OD facility. Interest charges could apply.

Please contact your bank for details.

How to keep track of your transactions

Make a record of every cheque you write in the cheque counterfoil (or cheque register of your chequebook. This can help you keep track of the total amount you have paid out. Check these transactions against your bank statements as soon as you receive them.

If you spot any discrepancies, notify your bank immediately. Or within the time period required by the bank.

Last updated on 07 Nov 2018