Bank Checks

Bank checks are a special type of check in which the drawer is the bank itself. The person who buys it pays in cash and pays a small fee in addition. He can then use the bank checks as a medium of transaction just like cash. Bank checks are usually treated as being safe like that of the bank itself. However under certain circumstances a bank check may be dishonored.

Whats & Whys of Bank Checks:

Bank checks refer to checks that are drawn by the bank itself and is payable to the person who bought it. Here the bank issuing the check is referred to as the drawer (issuer) and the nominated beneficiary is the drawee (payee). It is different from a simple check as a simple check is an unconditional order that requests the issuer to hand over the specified amount to the stated person. An ordinary check becomes stale after a pre-specified period of time. Bank checks are usually guaranteed by the bank and most banks clear these checks immediately. Nowadays people in many countries have the option of purchasing bank checks online.

Care to be exercised in case of Bank Checks :

• Bank checks are treated as unauthorized if the signature of an officer of the bank is found to be forged or put in without gaining the bank's authority. The drawer bank is also reluctant to pay for any check when a court order has restrained the payment against it.
• Bank checks can be dishonored if it is altered in a fraudulent and dishonest way. However banks fully cooperate with a person facing such a problem so that the check can be accepted if everything else is alright.
• In case of a theft or loss of bank checks, the drawer bank first investigates whether the assertion is true and if true the bank denies to pay when it is put forward by it who has no right to it. The bank check can be replaced by a duplicate one but a nominal fee is charged for the service.
• It is very important that the bank checks are drawn clearly and to the full legal name of the intended beneficiary.
• The customer must make the check payable to himself and not to the bank if he wishes to deposit a check in his account.
• It is highly recommendable that bank checks are not made payable to financial institutions. There is high probability that the amount payable can be misappropriated into somebody else's account. This puts all the parties(involved) in risk.

Bank checks have great utility as they are guaranteed and can be substituted for cash easily. But the customer must be careful while using them as there are instances when they turn non-redeemable and in case of loss it can be laundered easily. Money orders may be an useful substitute but it is not guaranteed.