# Understanding Bank Checks: How They Work and How to Write One

![Check](https://www.investopedia.com/thmb/TsTHggUi7vn19MpEiRxhpTaxhak=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/check.asp-final-3bbd162422734617b41e58e37ee33783.png)

*— Investopedia / NoNo Flores*

> **Definition**
>
> A check is a written, dated, and signed document that instructs a bank to pay a specified amount from the payor's account to the payee.

## What Is a Check?

A check is a document that directs a bank to pay a specific sum of money to the bearer. Its core components include a written description of the sum amount, the date, and the signature of the person or entity writing the check (known as the payor or drawer). The person to whom the check is written is the payee. The drawee is the bank on which the check is drawn. Checks serve as substitutes for physical currency. They are considered secure ways to transfer money between parties, even as electronic payments grown in number and use.

### Key Takeaways

*   Checks are a traditional financial instrument used to direct a bank to transfer a stated amount from a payor's account to a payee, offering a secure method of payment.
*   Various types of checks, such as certified, cashier's, and payroll checks, serve different purposes and provide varying levels of security.
*   Writing a check involves specific elements like the date, payee's name, amount, and signature, all of which ensure the check's validity.
*   Modern financial tools, including debit and credit cards, often overshadow checks, yet checks still offer benefits for large or specific transactions.
*   Bounced checks occur when there are insufficient funds in the account, often leading to fees and penalties for both the payor and sometimes the payee.

## Understanding the Function of Bank Checks

A check is a document that ensures payment of a specific amount of money. It is issued to account holders by banks. The payor writes the check and gives it to the payee, who then takes it to their bank for cash or to deposit into an account.

Checks essentially provide a way to instruct the bank to transfer funds from the payor’s account to the payee or the payee’s account.

The use of checks allows two or more parties to make a monetary transaction without using physical [currency](https://www.investopedia.com/terms/c/currency.asp). Instead, the amount for which the check is written is a substitute for physical currency of the same amount.

Checks are usually drawn on [checking accounts](https://www.investopedia.com/personal-finance/complete-guide-checking-accounts/), but they can also transfer funds from savings and other accounts. Checks can be used to make bill payments, as gifts, or to transfer sums between two people or entities. They are generally seen as a more secure way of transferring money than cash, especially with large sums. If a check is lost or stolen, a third party is not able to cash it, as the payee is the only one who can negotiate the check.

> **Fast Fact**
>
> Modern financial tools that work similarly to checks in that they provide a substitute for physical currency include: debit and credit cards, money orders, wire transfers, and internet banking.

## The Evolution and History of Bank Checks

Checks have been in existence in one form or another since ancient times. Many people believe a type of check was used among the ancient Romans.

Modern checks became popular in the 20th century, with usage surging in the 1950s when automation allowed machines to [sort and clear checks](https://www.investopedia.com/terms/p/positive-pay.asp). Check cards, first created in the 1960s, were the precursors to today’s debit cards.

Credit, debit cards, and other electronic payments have long overshadowed checks for most purchases. Checks are now somewhat uncommon but still occasionally used.

## Key Features of Bank Checks Explained

Though checks may vary in appearance, they usually share key features. The drawer's name and contact information is at the top left. The bank's name appears on a check as well.

There are a number of lines that need to be filled in by the payor:

*   The date must be written on the line in the top right corner of the check.
*   The payee’s name goes on the first line in the center of the check. This is indicated by the phrase "Pay to the Order Of."
*   The amount of the check in a dollar figure is filled out in the box next to the payee’s name.
*   The amount written out in words goes on the line below the payee’s name.
*   The payor signs the check on the line at the bottom right corner of the check. The check must be signed to be considered valid.

There is also a memo line in the bottom left corner of the check. The payor may use it to make notes, such as a [reference number](https://www.investopedia.com/terms/r/reference-number.asp), an account number, or any particular reason for writing the check.

Coded numbers are at the bottom of the check, beneath the memo line and extending to the signature line. These numbers are:

*   The bank’s [routing number](https://www.investopedia.com/terms/r/routing_transit_number.asp)
*   The payor’s account number
*   The check number

In certain countries, such as Canada, the routing number is replaced with an institution number—which represents the bank’s identifying code—and the transit or branch number where the account is held.

![Image](https://www.investopedia.com/thmb/wxqkbg4eU781B20-Oz4bgoLmCBk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Routing_Number_vs_Account_Number_Whats_the_Difference_Aug_2020-8939d2501c14490e8d85b94088a0bec9-1130ab2dae1b495b8cff8d988ebc9440.jpg)

**

The back of the check has an [endorsement](https://www.investopedia.com/terms/e/endorsement.asp) line for the payee’s signature when they are cashing or depositing the check. The receiving bank often stamps the back with a deposit stamp at the time it is deposited or cashed, after which it goes for clearing. Once the drawing bank receives the check, it is stamped again and filed. In some cases the check is sent back to the payor.

> **Fast Fact**
>
> The oldest surviving American checkbook, from the Bank of New York, dates to the 1790s.

## Exploring Different Types of Bank Checks

Beyond standard personal checks, there are certified checks, cashier's checks, and payroll checks, each serving a different purpose.

### Certified Check

A [certified check](https://www.investopedia.com/terms/c/certifiedcheck.asp) verifies that the drawer’s account has enough funds to honor the amount of the check. In other words, the check is guaranteed not to [bounce](https://www.investopedia.com/terms/b/bouncedcheck.asp). To certify a check, it must be presented at the bank from which it is drawn, at which time the bank will ascertain its authenticity with the payor.

### Cashier's Check

A [cashier’s check](https://www.investopedia.com/terms/c/cashierscheck.asp) is guaranteed by the banking institution and signed by a bank cashier, which means the bank is responsible for paying the funds. This type of check is often required for large transactions, such as buying a car or house.

### Payroll Check

Another type is a [payroll](https://www.investopedia.com/terms/p/payroll.asp) check, or paycheck, which an employer issues to compensate an employee for their work. In recent years, physical paychecks have given way to direct deposit systems and other forms of electronic transfer.

## Understanding Bounced Checks and Associated Penalties

A check bounces when it's written for more than what the account on which it's drawn holds and therefore cannot be negotiated.

The check bounces because it cannot be processed, as there are insufficient or [non-sufficient funds (NSF)](https://www.investopedia.com/terms/n/nsf.asp) in the account (the two terms are interchangeable). A bounced check usually results in a penalty fee for the payor. In some cases, the payee is also charged a fee.  

Other checking account fees can include a monthly service fee, a per-check fee (a charge for every check you write), a check printing fee, and a returned deposit item fee. A returned deposit item fee is charged when you deposit a check in your account that bounces.

## Frequently Asked Questions (FAQs)

## Do Banks Forgive Bounced Checks?

Banks have different policies on bounced checks. Oftentimes, banks charge [overdraft fees](https://www.investopedia.com/terms/o/overdraft.asp) or non-sufficient funds fees on bounced checks. Some banks may provide a grace period, such as 24 hours, in which time you can deposit funds to avoid the overdraft fees.

## Do Cashier's Checks Clear Immediately?

Typically, funds from a deposited cashier's check [must be available the next business day](https://www.investopedia.com/ask/answers/081716/how-long-does-it-take-check-clear.asp). However, a bank may place a hold on some of those funds if the check exceeds $5,252. It can also place a hold on the entire amount if it has reason to believe the check will not clear.

## What Is the Difference Between a Certified and Cashier's Check?

Both [certified checks and cashier's checks](https://www.investopedia.com/personal-finance/certified-check-vs-cashiers-check-which-safer/) are considered more secure than personal checks. Cashier's checks are signed by banks and drawn against a bank's account, while certified checks are signed by an individual and drawn against a personal account. Both checks are guaranteed by the bank, which makes them more secure.

## The Bottom Line

Checks are instruments directing a bank to pay their bearers specific sums of money. Checks make transactions safer because cash isn't necessary to complete a transaction. The various types of checks include personal, certified, cashier’s, and payroll checks. Once you learn how to use a check correctly, including [how to void a check](https://www.investopedia.com/how-to-void-a-check-4797998), you can take advantage of this alternate, secure payment method that you may prefer to use in certain circumstances.  

> **Article Sources**
>
> 1.  Cornell University, Legal Information Institute. "[Payor](https://www.law.cornell.edu/wex/payor)."
>     
> 2.  Federal Reserve Bank of New York. "[Historical Echoes: Cash or Credit? Payments and Finance in Ancient Rome](https://libertystreeteconomics.newyorkfed.org/2013/02/historical-echoes-cash-or-credit-payments-and-finance-in-ancient-rome.html)."
>     
> 3.  Federal Reserve Bank of Atlanta. "[Economic Review: The Evolution of the Check as a Means of Payment: A Historical Survey](https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.444.2744&rep=rep1&type=pdf)," Pages 19-20.
>     
> 4.  Oregon State University. "[Information Regarding Personal Checks](https://fa.oregonstate.edu/controllers-unit/student-resources/information-regarding-personal-checks)."
>     
> 5.  Rare Book Buyer. "[Newly Discovered Oldest Surviving American Checkbook.](https://rarebookbuyer.com/webuyoldbooks/newly-discovered-oldest-surviving-american-checkbook/)"
>     
> 6.  Consumer Financial Protection Bureau. "[I Deposited a USPS Money Order, Cashier's Check, Certified Check, or Teller's Check. When Can I Access This Money?](https://www.consumerfinance.gov/ask-cfpb/i-deposited-a-usps-money-order-cashiers-check-certified-check-or-tellers-check-when-can-i-access-this-money-en-1033/)" 
>     
> 7.  Office of the Comptroller of the Currency. "[Avoiding Cashier's Check Fraud](https://www.occ.gov/news-events/news-and-events-archive/consumer-advisories/consumer-advisory-2007-1.html)."
>     
> 8.  Consumer.gov. "[Your Paycheck](https://consumer.gov/managing-your-money/your-paycheck)."
>     
> 9.  FDIC. "[Checking Accounts](https://www.fdic.gov/consumers/consumer/moneysmart/podcast/documents/checking-accounts-checking-account-fees.pdf)."
>     
> 10.  Experian. "[How You Can Recover From a Bounced Check](https://www.experian.com/blogs/ask-experian/how-to-recover-from-bounced-check)."
>      
> 11.  Office of the Comptroller of the Currency. "[The bank placed a hold on a cashier's check that later turned out to be fraudulent. Aren't cashier's checks supposed to be honored immediately?](https://www.helpwithmybank.gov/help-topics/bank-accounts/cashiers-checks/cashiers-check-hold.html)"