How to Write a Cheque in CanadaNovember 03, 2022
Since E-transfer, online banking, and digital payments have become the preferred method of transferring money and making bill payments, cheques just aren’t as common as they used to be. That being said, though, many places still require them or use them as their preferred method of payment. Lots of people still even choose to pay their rent using post-dated cheques. The one thing about cheques, though, is that they have to be written out correctly in order to be valid.
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The Correct way to Write a Cheque
Before we get into the details of writing cheques, it is important to note what a cheque is and how it works. Essentially a cheque is a way for the payer to give permission for the person they are paying to take money from their bank account, usually a chequing account. While it is more common these days to use an E-transfer, cheques are still around.
When it comes to filling out a cheque, there are a few key things to remember. The first being that it won’t be valid unless it is filled out correctly. Let’s go over what is needed to make the cheque valid.
- In order for a cheque to be valid it needs to be dated. The space for this is usually located in the top right corner. There will be a line next to the word date. This is where you are going to write the date that you have written the cheque.
- The next thing you want to write who you are making the cheque payable to. This is the person who will be cashing the cheque. Usually located under the cheque issuers information in the left hand corner, there will be a line that says “Pay to the order of”. This is where you put the recipient's information.
- After that you are going to want to enter the dollar amount in numbers that you want taken out of your account. You will see a dollar sign ($). It is important when entering this number that you put down the cents to 2 decimal points. An example of this would be $100.00. $100 or $100.0 would be seen as incorrect.
- Once you have added the amount in numbers, you then want to write the amount as well. Under the recipient's name, there will be a place to write the amount. For example: if the amount is $100.20, you would then write “One hundred dollars and twenty cents” or “ One hundred dollars and 20/100”. You can use whichever option you prefer.
- Now that you have done all of that, the next step would be to sign the cheque. This is the final step to validating it. There will be a line at the bottom right corner where you sign the cheque. Be sure to use a legible signature that you would normally sign your bank documents with.
- Lastly, there is the option to add a memo. This is optional, but this allows you to add in what the cheque is for if you choose.
Once you have written and given the cheque, the recipient only has a certain amount of time until the cheque is no longer valid. How long is a cheque valid for? Well, it only stays valid for 6 months. After that a new one will have to be issued.
Writing a Post-Dated Cheque
If you are writing a post-dated cheque, then the process is a little different. While all of the other fields are the same, the date would be different. Instead of writing the date of the day you wrote the cheque, you instead write the date that you wish the cheque payment to go through. For example: If you write multiple post-dated cheques for your rent to come out on the first of every month, that is when your cheque payments will come out. Once the cheques have run out, you will have to write new cheques.
Post-dated cheques are very common when it comes to making rent payments. Most landlords require a year of cheques in advance if you choose to pay your rent this way.
Writing on the Back of the Cheque
If you flip the cheque over you will notice that there is a line for a signature. This line is meant for the payee, also known as the recipient. The recipient of the cheque is to sign the back and known as the endorsement signature. This notifies the institution that the payee has received the cheque and is authorizing it to be cashed.
What to do about a Mistake on the Cheque
If you make a mistake when writing the cheque details, the easiest thing to do is rip it up and write a new one. That, however, isn’t your only option. Another thing you can do is cross out the mistake and then either write the correct thing above or beside the mistake. Whichever space has more room. It is important to remember that you must initial where you make the change on the cheque or it could not be accepted.
Filling Out Cheques from different Financial Institutions
While many people think that cheques are different from different institutions, the reality is most of them look the same. There will be identifying features that will distinguish where the cheque is from, but the layout of where the information is to be written and what information is to be put on the cheque.
The main difference you will find on your cheque, whether it is from TD, RBC, CIBC, Scotiabank, BMO or any other financial institution, is the numbers on the bottom. These numbers contain your bank account information such as the branch number, transit number and account number. They tell the bank where to take the money from when the cheque gets cashed.
Another reason someone may use a cheque is to use it as a void cheque. Basically, a void cheque works just like a direct deposit form. When getting a loan, or purchasing a vehicle or any other large purchase, it even works for monthly insurance payments. It allows the lender to take the money from your account as automatic monthly payments. This will show as a debit transaction on your account statement and is considered an electronic payment. It is treated differently than an online payment since it comes out automatically and isn’t processed as an online payment.
To fill out a void cheque, all you need to do is take a blank cheque and write VOID on it. If you do not have any cheques, you can print off a direct deposit slip from your online banking. Some places only require you to supply the transit number, branch number and account number that you can also find through your online banking.
Are there Limits on Cheque Amounts?
The great thing about cheques, unlike E-transfer, is that there is no amount limit. This is why cheques are still used for things like rent, especially in this economy. Since the limit on E-transfers is $3000.
This is also why large companies tend to use cheques as well. Often the cheques they write, whether they are for business expenses or not, are for large amounts of money. Unlike E-transfers though, many people can’t use the money immediately because it takes a few days for the funds to transfer from one institution to another. In some cases, you may have no holds on your account, then you can use the funds immediately. This can be risky though in case the cheque bounces.
Process for when a Cheque Bounces
Because it takes a few days for a cheque to be processed, you may have enough money in your account when you write the cheque but not once it is cashed. That can be an issue with cheques. You don’t really have much control when the other person cashes it.
If they cash it and you do not have enough money in your account, then that will result in an NSF (Non Sufficient Funds) fee. The amount of this fee ultimately depends on your financial institution.
- TD- $35
- CIBC- $45
- RBC- $45
- BMO- $48
This is one of the reasons many Canadian banks and credit unions choose to put holds on cheques before you have access to the funds. This protects both you and the person who wrote the cheque.
Cheque holds are actually very common. Especially if you are receiving a cheque from someone you haven’t received one from before. While it may be super frustrating, it is important to remember that it is done to protect you more so than the person who wrote the cheque. If the cheque was cashed without a hold and you spent the money and then it was discovered the person that wrote the cheque didn’t have the money in their account, you are then on the hook for the money that you spent.
The amount of time that a cheque is held for can range anywhere from 4 to 8 business days. If you are unable to wait that long and have never received a cheque from the company or person before, you may be better off to ask for a different form of payment.
While financial institutions can hold cheques at their discretion, they won’t always hold them. Don’t be so quick to turn down a cheque hold if you aren’t sure if the cheque issuer isn’t reliable or not. Keep in mind how youu cash cheques will also impact whether or not your cheques will be held, whether you get frequent cheques from the issuer or not.
Ways to Cash a Cheque
In today’s day and age, cashing a cheque is easier than ever. If you are in no rush to get your money and are okay with the cheque being held, then you can easily deposit your cheque through your financial institutions app. Sometimes, if you have a good relationship with your bank or they are comfortable with the cheque issuer, then the hold for online deposited cheques will be lifted.
In order to deposit your cheque through online banking, all you have to do is select deposit a cheque in the app, take a picture of both sides of the cheque and then enter the correct cheque amount. You should see the amount added to your bank balance almost immediately. If the cheque is being held it should specify that somewhere in your online account. It will be in a different place for every bank or credit union.
Another option when it comes to depositing cheques is to go to your banking institution directly. If you submit it through the ATM, it is likely that the cheque will be held. If you go to a teller, they are able to make a judgment call on whether to hold the cheque or not. The teller can also make it so part of the cheque is held and part is available. This is mostly to protect you as well. If they give you a small amount, you get the money that you need but, if the cheque bounces, then you won’t have to come up with the full amount to pay back.
How to Keep Track of Your Cheques
Each cheque has an individual number to identify it. Everytime you write a cheque you should keep track of who you addressed it to, the cheque number and the amount you wrote on the cheque. A good place to keep track of this is in your cheque book, also known as a cheque register. Because they can come out whenever the recipient decides to cash it, you may not remember what the cheque was for. It helps to keep you on track, but it will also verify the amount that was cashed was done so for the right amount to the right person. This is information you will need if you ever need to request a stop payment.
How to Stop a Cheque after you have Written it
If you have written a cheque and it was either lost, stolen or you no longer have the funds to cover, you should put a stop payment on it. A stop payment often comes at a charge though, and may not work depending on when and if the cheque cashed already. It is important to make a stop payment and report any stolen cheques as soon as you realize. Unfortunately, Canadian bank fraud is a thing as well as cheque fraud and fraudsters will use stolen cheques to take money out of your account. So, whether the cheque was used or not, you should report it to the bank and a stop payment will be issued if required.
How a stop payment works, is it will stop the cheque from taking the money from your account and getting deposited into the receiver's account. In order to request a stop payment, there are a few key pieces of information that you need to have:
- The cheque number
- The exact amount of the cheque
- Name of the payer/receiver of the cheque
- Date of the cheque
If the stop payment does not go through in time, then the receiving will be notified. It will also be up to you to contact the receiver to try and get the money back if the cheque was already cashed into the account. You are still responsible for that money. The receiver likely can’t spend the money from the cheque you gave them and you will need to provide it.
While cheques are not as common as they used to be, they are still quite commonly used so it is likely that you will need to write or cash a cheque at some point. You may not have a cheque book, but they are usually readily available from your financial institution for a small cost. All you need to do is decide how many you would like, the design, and then order them. They can be very handy to make a deposit, pay rent or even just as a void cheque to set up automatic monthly payments. As long as you fill out a cheque properly, then you shouldn’t have any problems using them. Just keep in mind that you need to keep the amount you wrote the cheque for in your account at all times to avoid a NSF fee. No matter the reason you need to cash one or use one, hopefully these tips can help you understand how to use them and what the possible risks are.