Even if the use of cheques has declined in the last decade, it hasn’t gone away entirely: Canadians wrote over 550 million cheques in 2017, according to Payments Canada.
There was a 41% decrease in the number of cheques in circulation in Canada between 2008 and 2016, according to a report by Payments Canada published in 2017. However, for large amounts, cheques are still the preferred method of payment.
With an average total of $5,000 per transaction, cheques surpass all other methods of payment such as cash, transfers and credit cards. Admittedly, this average is inflated due to commercial cheques, whose sums average $7,128. Comparatively, the average amount for personal cheques is $396.
People still prefer cheques for business-to-business transactions and to pay sums owed to the government (income taxes, land value tax, etc.). “Rent and daycare are still often paid for by cheque,” adds Ginette Bouillon, Head of Financial Program Products at National Bank.
A cheque must be filled out correctly for it to be valid. Use a pen with blue or black ink for better legibility. Here are the details for each piece of information that must be included on a cheque.
A cheque is valid for six months. After that, it normally can’t be cashed. Be vigilant at the start of a new year: “That’s when you often see cheques dated with the previous year. If more than six months have elapsed from the date on the cheque, it won’t be accepted,” warns Bouillon.
As for postdated cheques, although it’s helpful to write a future date on a cheque, sometimes the cheque can still get cashed before the indicated date. Banks handle a large volume of cheques and some could slip through the cracks. If you’ve been charged an insufficient funds fee because of this, ask your bank to reimburse you. The cheque can also be returned, with the amount credited back to your account until the date written on the cheque.
Never sign a cheque without having written the beneficiary’s name. That way, in case of loss or theft, the person who finds the cheque can’t just write their name on it and cash it.
First, write the amount in numbers, separating the dollars from the cents using a period. Draw a horizontal line before the first digit in the dollar amount to ensure that the number cannot be increased. Then, write the dollar amount in letters. The cent total can be written in numbers.
If you don’t have enough money in your account to cover the indicated amount, you will be charged a not sufficient funds fee (NSF). At National Bank, this fee totals $45.
On the other hand, if you try to cash a cheque that has insufficient funds, then you won’t have access to the requested amount. If your bank gave you immediate access, the amount will be subtracted from your account balance. This could lead to an overdraft, in which case you will be charged interest.
You don’t have to fill out the description section at the bottom of the cheque, but you could write down, for example, the number of the invoice you’re paying. “If there’s a dispute regarding payment, this could be used as proof,” explains Bouillon.
A cheque can’t be cashed without a legible signature. Your signature must be identical to the one you provided when you opened your account. If there are any doubts, the bank could proceed with verifications.
Make sure you keep your cheques in a safe place and, to avoid any risk of fraud, do not sign any cheques without filling them out first.
When depositing cheques worth $100 or less, the money is usually available right away. Over $100, the beneficiary has access to the first $100, but the rest could be on hold for 4 to 8 business days. This applies to cheques deposited in person with a teller, at an ATM or with your mobile device.
This delay allows the bank to ensure that the emitter of the cheque has enough funds in their account to cover the amount indicated on the cheque. To do so, the bank often has to contact another financial institution to carry out verifications.
However, banks don’t always put holds on the money. Customers who have a good relationship with their bank can often withdraw the entire amount right after depositing the cheque.
Since it costs more to process and is less safe than electronic transfers or Interac transfers, for example, cheque payments may very well disappear within the next few years. Until then, make sure you know how to write a cheque!
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