What is a check?

  •         A written order to a bank to transfer money directly from one account holder’s bank to the recipient’s.
  •         Through the check system, two or more parties can make monetary transactions without using actual currency like cash.
  •         In some parts of the world, the word “cheque” is used.

The format of a check may be different depending on the bank, but certain parts stay the same. Essential components of this document include the names of the drawer and the payee, the date, and an authorized signature. Missing one of these elements would render the record invalid.

Types of Checks

The types of checks are defined according to their specific function. Here are some examples:

  1.   Bad Check

A check that has something wrong with it called a “bad check”. By technical definition, a bad check is a check linked to a ghost account or an account with insufficient funds specified by the check. Distributing a bad check is illegal. The punishment for the crime depends on the amount of money written on the check and the place where the felony or misdemeanor is committed.

In these cases, the check might “bounce” and the bank will charge penalties to the drawer. Thus, the name “rubber check” is also used to refer to checks not honored by banks and vendors as another term for a bad check. To avoid this predicament, check your balance regularly online.

  1.   Certified Check

The opposite of a bad check or rubber check is called a “certified check”. It is a type of checked verified by the bank guaranteeing that the payee will receive enough money indicated on the check. The bank also validates the authenticity of the signature. Moreover, two bank employees countersign the check as a supplementary security measure against theft and fraud.

Because the bank is responsible for providing funds to the check recipient, the drawer pays cashier check fees. Payment ranges from $5 or more. Some banks require percentages of the check amount as compensation.

  1.   Cashier’s Check

Another efficient way of eliminating the terrible risk checks is using a “cashier’s check.” This type of check is almost like a certified check with only one small difference. While an accredited check gets its funds from the depositor’s account, cashier’s checks are issued by the bank using its own funds.

Cashier’s checks are often used to purchase expensive items like cars and real properties. However, cashier’s checks are also prone to scams. In this case, refrain from accepting cashier’s checks from strangers. Don’t use them until the bank clears the check.

  1.   Substitute Check

A “substitute check” is the digital counterpart of a paper check. Only banks can create them. In this digital age, governments and banking institutions encourage the use of substitute check to facilitate transactions and reduce the reliance on physical counterparts.

A substitute check can also be used as evidence of payment. A physical copy can be requested by an individual from a bank for other financial purposes like taxation. Bank clients can also print electronic copies of checks as a proof of payment or for documentation.

  1.   Paycheck

A “paycheck” is a check for the total amount of compensation or wages an employee gets from an employer. The form of the check depends on the nature of the job contract and the relationship between the employer and banking institutions. These days, most paychecks appear in electronic form, and the salaries are directly deposited to the employee’s account.

History of the check

Payment through a checking system has existed in some method or another since biblical times. Historians think that a form of the check originated in ancient Rome. While each society embraced checking as its own method each shared the basic idea of exchanging a check for material money. In fact, the earliest American check dates to the 1790s.

Checking as we know it today grew widespread in the 20th century. Check usage billowed in the 1950s as the check process grew automated, and computers were able to sort and clear checks. Check cards, first created in the 1960s, were the forerunners to today’s debit cards. Credit and debit cards and other methods of automated payment have since overshadowed checks as the dominant means of paying for goods. In fact, checks are now surprisingly rare.


This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stockpile assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell. There is no guarantee that any strategies discussed will be effective. Each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented.

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