Have you ever found yourself in a situation where you needed to issue a cheque but weren’t exactly sure how to go about doing it correctly? Writing a cheque may sound like an antiquated method of payment, but believe it or not, this form of payment is still used by many individuals and businesses across Canada. In fact, it remains to be one of the cheapest methods of payment! To ensure that your financial transactions are processed without any delays or complications, learning the basics of how to write a cheque in Canada is a valuable lesson.
Table of contents
- What is a cheque?
- What are cheques used for in Canada?
- How to write a cheque in Canada
- Using cheques in Canada
In this blog post, we will provide you with the essential steps on how to write a valid cheque in Canada. Read on if you want to take control of your finances and make every penny count!
A cheque is a document that instructs a bank to pay a specific amount of money from a person or business’ account to the person or business in whose name the cheque has been written. The person or business writing the cheque is known as the drawer. The person or business receiving the payment is known as the payee.
Cheques are a convenient way to make payments and they can be used for both personal and business transactions. In order for a cheque to be valid, it must be signed by the drawer and dated. The date on a cheque indicates when the funds will be withdrawn from the drawer’s account. Keep in mind, most cheques expire or won’t be deposited by a bank if 6 months have passed since the date on the cheque. Once a cheque has been signed, it cannot be altered. If a mistake is made, a new cheque must be written and the old one should be voided.
Cheques can be postdated, which means they can be cashed on or after the date indicated. Postdated cheques are often used to make rent or mortgage payments. If you receive a postdated cheque, you should not cash it until the date indicated, or later. Otherwise, you may end up with a dishonoured cheque and pesky bank fees.
A cheque is a type of negotiable instrument, which means it can be used as a form of payment. In Canada, you can write a cheque to pay bills or purchase goods and services. To do so, you need to fill out the cheque with the correct information, including the recipient’s name, the date, the amount of money you want to pay, and your signature. Once the cheque is filled out, you can give it to the recipient. From there, the recipient can take it to their bank and deposit it into their account. The funds will then be transferred from your account to theirs.
It’s important to note that you should only write a cheque if you have enough money in your account to cover the amount of the cheque. If you don’t, your cheque may bounce and you could be charged a non-sufficient funds fee.
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In Canada, cheques are used for a variety of purposes, including paying bills, receiving payments, and making purchases. For businesses, cheques are often used to pay suppliers and vendors, as well as to process employee payroll. In addition, many Canadian banks allow customers to use cheques to withdraw cash from their accounts. Cheques can also be used to send money to family, friends and even charities.
With technological advancements in banking, many alternatives to cheques are now available. For instance, there are wire transfers, e-transfers, online bill payments, PayPal, and much more. You might be wondering, why not use one of the many other payment options available? While banking technology is great, you almost always incur a large fee to send money this way. In essence, you pay more for the convenience and speed of using fintech to send money. With a cheque, you only have to pay for the cost of the cheque itself, maybe the cost to mail it as well. However, this is much cheaper than other options.
Lastly, sometimes a cheque can be the easiest form of payment. For example, if you’re sending money across a border, a cheque usually has less hassle than electronic payments. Or, if you’re sending a large sum of money, such as for a down payment on a home or a tuition payment, a cheque is often cheaper and easier to process.
In Canada, there are a few simple steps you need to follow in order to write a cheque correctly:
- Step 1: Fill in today’s date on the top right-hand side of the cheque (or a date in the future if you’d like to post date your cheque).
- Step 2: On the line that says “Pay to the order of” write the name of the person or organization you’re sending money to. Be sure you’re using their legal name that would appear on their bank account. Lastly, make sure to spell their name correctly!
- Step 3: On the line below, write out the amount of money you’re sending in words, not numbers. If there are cents with the payment, include it at the end using “/100”. For example, if you were sending $100.25, you would write, “One hundred and 25/100.” If there’s still space left, draw a line to fill it.
- Step 4: In the box with the dollar sign, write the number of money you’re sending, including cents.
- Step 5: Add a quick description of what the money is for in the memo line. This is optional, but is a good step to follow for proper record keeping.
- Step 6: Once the cheque is all filled out, sign it at the bottom right.
Here’s a photo of what a properly completed cheque looks like:
When writing a cheque in Canada, the amount should be written in words and numbers. The dollars should be written in words and the cents are written with numbers. Of course, in the box with the dollar sign, the amount you’re sending would be expressed in numbers only. However, the middle line tends to be where people get confused. For example, if the amount is $123.45, it would be written as “One hundred, twenty-three dollars and 45/100.”
Including cents on a cheque is important as it helps to avoid errors when the cheque is processed. Without this information, the cheque could be dishonoured or the cents might not be processed properly. As such, it is always best to include all relevant details when writing a cheque.
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In Canada, a postdated cheque is a cheque that is dated for deposit in the future. The payee usually cannot cash the cheque until the indicated date or later. Someone may issue a post dated cheque for an upcoming expense that they don’t want to be deposited until it’s actually due.
To write a postdated cheque, simply fill out the cheque as you would any other cheque and indicate the future date in the “Date” field. Be sure to use the month/day/year format so there is no confusion about when the cheque can be cashed. When you give the cheque to the payee, let them know that it is postdated so they are aware that they cannot cash it immediately. Once the indicated date arrives, the payee can take the cheque to their bank and cash it without any issues.
Postdating a cheque can be a helpful way to ensure that bill payments are not made early or that rent is not paid before you have actually received your paycheque.
A void cheque is a cancelled cheque that can no longer be deposited. Someone may want to void a cheque if they are no longer sending payment and do not want the cheque to be in a cashable state. To void a cheque, simply write “VOID” in big letters across the document. Anyone who attempts to bring it to a bank to cash would be denied since it’s been voided.
If you have already sent a cheque in the mail and want to void it, things are a bit trickier. Instead, you will have to issue a stop payment with your bank. In order to do so, you will need the cheque information, such as the date, payee name, and amount. By providing this information to your bank, they can prevent the cheque from being deposited should the payee try to cash it. Keep in mind there is usually a fee to issue a stop payment with a bank.
Related Reading: 5 Steps to Transforming Your Relationship with Money
In Canada, cheques are typically made out to a payee by writing the payee’s name on the “pay to the order of” line. The payee is the person or entity who is being paid. The payee’s name should be written as it appears on the recipient’s bank account. If you’re not sure how to spell the payee’s name, you can ask them for the exact name on their account. Once you have the payee’s name, write it on the “pay to the order of” line and sign the cheque on the “signature” line. The payee can then take the cheque to their bank and deposit it into their account. Make sure you keep a copy of the cheque for your records.
Cheques are a safe and easy way to make payments in Canada. Afterall, they are a tried and true method of payment having been around for decades! Now that you know how to write a cheque in Canada, you can begin using this reliable method of payment.