Cheque payments
Cheques (or Checks in US English) are small documents that give order to banks to pay money from a bank account. The person who writes the cheque is known as the drawer, and must have a transactional bank account against which the cheque is drawn. The cheque usually contains the amount to be paid in figures and numbers and the person to whom the money should be paid, and is also signed by the drawer. The person whom is being paid them sends the document to their bank, who makes the transaction, paying the person or company to whom the cheque was issued the amount on the cheque, then exchanging the balance of all cheques issued that day between the two banks involved.
A cheque is an example of a bill of exchange, and cheques were introduced to save people from having to carry large sums of money around in order to pay for goods and services. Bank notes were originally in the form of cheques that were supplied in designated denominations.
Cheque payments history
It is unclean where the word 'cheque' originates, but most people believe it be from the French word chèque, which can mean 'control'. Interestingly, the similar word 'check' in chess (spoken when a player attacks their opponent's king) has the same etymological root.
Cheques have been around since before the birth of Christ. In ancient India, merchants used a system known as 'adesha' in which traders would sign a note ordering their banker to pay another trader a certain amount of money, which was then passed to the trader who needed to be paid.
The cheque system became popular with the advent of banks in the early 1500s. People with wealth would deposit their money with cashiers, and instead of going to the cashier to withdraw funds in order to pay someone, they would simply pass the payee a signed note instead. The payee could then take their note to the cashier to receive the sum they were owed in cash.
The Bank of England were the first to issue pre-printed cheques, which they did in 1717. All banks that used cheques would meet on a daily basis to exchange cheques and work out any balances owed - this became known as 'cheque clearing'.
In 1969 cheque guarantee cards were introduced. There cards had to be signed and acted as security when paying by cheque, as the signature on the card had to match the signature on the cheque. These cards were replaced by multipurpose debit cards in the mid-1990s. This was around the same time that cheque-use reached its peak, especially as most financial institutions now had developed automated cheque systems.
Cheque payments Today
The rise in alternative means of payments, particularly debit cards and eWallet solutions, has seen a rapid decline in the use of cheques. In most of Europe, cheques are seldom used at all - instead instant bank transfers made over the internet are preferred. In 2009 the UK Payments Council announced that cheques would be gradually phased out altogether, and would cease to be a legal way of making payments by October 2018, pending a review.
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