Although cheques are being used less in Canada, they are still the preferred means of payment for large amounts. The average value of a cheque transaction is $5,000, which is more than for any other method of payment, including cash, transfers and credit cards. Admittedly, this value is inflated by commercial cheques, where the average amount is much higher than for personal cheques. Cheques are still widely used for business-to-business payments and government payments (income taxes, property taxes, etc.). Canadians also often use cheques to pay their rent or daycare fees.
Writing cheques: A how-to guide
To be valid, cheques must be completed correctly. Use a pen with black or blue ink to make your cheque easier to read. Here’s what you need to know about each section of the cheque.
1. Enter the date
Cheques remain valid for six months. After this time, you usually won’t be able to cash them. Pay attention at the start of a new year, as a frequent mistake during this period is to write the previous year instead of the new one. If the date on the cheque is more than six months ago, it won’t be accepted.
What about postdated cheques? Though it’s sometimes handy to write a cheque with a future date, bear in mind that postdated cheques may still be cashed before the date written on them. Banks handle a large volume of cheques, which means that some can slip through the system. If you’re charged a non-sufficient funds fee because a postdated cheque was cashed early, you can ask your bank to reimburse you. The cheque may also be returned and the funds credited back to your account until the date written on the cheque.
2. Write the payee’s name
Never sign a cheque without entering the name of the payee. Otherwise, if your cheque is lost or stolen, anyone who gets their hands on it could write in their name and cash it.
3. Enter the amount
Start by writing the amount in numbers, separating the dollars from the cents with a period. Draw a horizontal line before the first digit of the dollars, so that no one can increase the amount of the cheque. Then write out the dollar amount in words. You can write the cents in numbers.
If you don’t have enough money in your account to cover the amount of the cheque, you’ll be required to pay an NSF (non-sufficient funds) fee. At National Bank, the fee is $45.
If you deposit a cheque at your bank that ends up being rejected for non-sufficient funds, you won’t have access to the amount requested. If your bank let you access the funds immediately, the money will be debited from your account balance. This could lead to an overdraft and interest being charged.
4. Add a memo, if you want
The memo section at the bottom of the cheque is optional. You can use this section to describe what the payment is for, e.g., by entering the number of the invoice you’re paying. If there’s ever a dispute about payment, it could serve as proof.
5. Sign the cheque
Cheques that are unsigned or where the signature is illegible cannot be cashed. Your signature must match the signature you provided when you opened your account. If there are any doubts, additional verifications may be required.
To reduce the risk of fraud, keep your cheques in a safe place and don’t sign them before you fill them out.
Is there a hold funds period when you deposit a cheque?
When you deposit a cheque for $100 or less, the funds are usually available immediately. For cheques over $100, the payee has access to the first $100, but the remaining funds may be held for 4 to 8 business days. This applies whether you deposit a cheque at a branch counter, at an ABM or using your mobile device.
This period allows your bank to check that the person who wrote the cheque has enough money in their account to cover it. This often involves making inquiries with another financial institution.
However, banks do not always apply a hold funds period. Clients in good standing with their bank can often access the full amount of the cheque straight away.
Since cheques are more costly to process and less secure than other means of payment, such as electronic transfer or Interac e-Transfer, it’s possible that cheque payments will disappear in future. But in the meantime, make sure you know how to write one!
Tip: When you need to deposit a cheque, there’s no need to visit a branch. Opt for the digital deposit feature in your National Bank app. Read our FAQ to learn more about digital deposits.