What is a Check?

Definition: A check is an order written by a depositor instructing the bank to pay a specific amount to a recipient from the depositor’s bank account. In other words, a check is a way to tell the bank to transfer money from your bank account to someone else personally or someone else’s bank account.

What Does Check Mean?

Checks have been around almost as long as bank accounts. The idea of a check is that its difficult and unsecure trying to move large amounts of cash between two people or business.

Think about it this way. If you were going to pay cash for a new car purchase, going to the bank and withdrawing $10,000 and bringing it to the car dealership is much more difficult and unsafe than just writing a check. Anyone could steal the cash. If you loose the cash, it could be picked up by anyone.

Example

Checks on the other hand don’t have any of those problems. A check is really a contract between three parties: makerpayee, and the payer. A check is written and signed by the maker ordering the bank or payer to pay that sum of money to the payee or recipient on the check face. No one else is involved in this contract.

If you dropped your check for $10,000 on the way to the car dealership, no one would be able to use it or legally cash it. Obviously, you still have to be careful with your checks after they are written because someone could try to forge them, but as is nothing could happen. The bank would not cash the check for anyone other than the car dealership.

This is a different story after the recipient signs the check. Once the care dealership signs the check, it becomes known as bearer paper. In other words, it’s the same as cash. Anyone can pick it up and deposit it.


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