If you are confused by the various types of checks out there, you're not alone. They are supported by an extensive financial, regulatory, and legal framework designed to govern the payment of checks as negotiable instruments. We've tried to boil these descriptions down to the essential parts to give you a basic understanding of the different types of checks:
- Order check - Payable only to the individual named or a person named by his endorsement. This is the most common type of check in the United States of America today.
- Bearer check - Payable to anyone in possession of the check upon presentation.
- Certified check - A check where the issuing bank has verified that there are sufficient funds in the account at the time it is issued to cover the amount of the check.
- Cashier's check - A check which is drawn against a financial institution's funds rather than the account of an individual.
- Traveler's check - Prepaid checks in specific denominations which were popular with travelers before ATMs and credit cards because they were usually refunded or reissued if lost or stolen. Although preceeded by similar functioning cheques elsewhere, the modern day traveler's check is attributed to Marcellus Berry in 1891 after the President of American Express, James Fargo, had difficulty cashing checks while traveling in Europe.
- Money order - A type of check purchased at a financial institution or the U.S. Post Office which is prepaid and does not require an account with the institution.
- Rubber checks - A check written on an account in which there are insufficient funds to cover the amount of the check is often known as a Non-Sufficient Funds check or a rubber check because it has/will bounce.
We hope you found this introduction to the different types of checks useful. We hope it has cleared up any confusion which you have and provides the basis for a more in depth examination of the particular type of check which is of interest to you.
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