Some people might not know that there are many types of checks. This article will help with understanding what differentiates each type of check so you’ll never wonder again about how they differ from one another.
1. Personal Checks
A personal check is an order that draws on funds in one’s checking account. These checks are designed to keep the transfer process quick and simple.
They are typically set at a lower limit compared to commercial checks, which are often used by businesses.
They are also normally reserved for situations where one has less than $500 worth of transactions within any given month.
Typically made of carbonless paper, these won’t give you copies of what was written until they have been processed by the receiving bank and they want back more templates of the same check.
This is done so that their recipients will be more likely to accept cash without questioning its origins as long as it has gone through some kind of vetting process with them beforehand.
2. Payroll Checks
A payroll check is a check that an employer uses to pay their employees, often with deductions for taxes and other things like voluntary contributions.
If you have a paycheck, it’s likely to be an amount that reflects what you earned for a week’s worth of work or a month’s worth of work. If you’re self-employed, it might represent your earnings for one contract or job.
3. Bank (Cashier’s) Check
A cashier’s check is a type of payment that can be used like cash. You can use it to make purchases, open lines of credit, purchase investments, or in any other way you would spend money.
There are different types of checks but a cashier’s check will look very similar to your everyday bank check.
They both have the same size amount printed on them (or at least within 10 dollars) and they resemble something you’d find at your bank branch to get cashed out with.
There are different sub-types of checks at banks and they include:
A bearer check is one that is paid to the person who is holding or bearing the check. They are transferable by delivery, which means that if you take the cheque to the bank, you will be paid without any additional authorization.
Therefore, this means anyone can take it and use it as if they were the person who wrote it.
Since it does not need to be endorsed at the back like a regular bank check, anyone can cash or withdraw funds from this type of check.
An order check works totally differently from the bearer check because the phrase ‘or bearer’ is removed (canceled out) from these checks.
Therefore, this check can only be given to the individual whose name appears on the check, and the bank will conduct a background check to verify the check bearer’s identity before disbursing the funds.
These checks are characterized by two sloping lines.
The lines ensure that regardless of who brings the check, payment can only be made to the person whose name is printed on the check, i.e. the account holder and their bank account.
This means that both paying and receiving accounts must be established at the same bank institution; otherwise, you will be physically unable to cash your cheque. Therefore, this qualifies as one of the safest checks
Open checks are the opposite of crossed checks discussed above. This means such checks can be cashed at any bank. The check is also transferable by delivery.
One thing to be noted is that the issuer of the check must sign both at the front and back sides.
These are checks issued by a bank to travelers with the ability to be cashed by another bank in a foreign country. the checks are characterized by the lack of expiry dates, hence being suitable for use in future travels.
4. Convenience Checks
A convenience check is per-transaction cash withdraw from your checking account. It can be conveniently deposited to any account at a different bank for quick access to funds.
Convenience checks are different than regular, paper checks because there is no account number on the check.
Therefore, passing a wallet of these types of untraceable checks issued could have disastrous consequences (the money inside is not being drawn from your actual bank accounts).
Convenience cheques also cannot pay off monthly balances or buy goods from merchants that accept debit card payments.
However, with the use of certain services, it’s possible for customers to purchase something without having to present physical identification.
5. Certified Checks
A certified check is a payment document that only specifies the individual’s account number on the front.
It then requires a signature both on the back of the check and at a different location (often in the upper right-hand corner) as proof that they know their own account number.
This way, there can be no rewriting by someone who might not know it.
6. Stimulus Check
A stimulus check is a government check sent to individuals that are unemployed or underemployed. These recipients receive the money either in paper form or as an Electronic Funds Transfer (EFT) direct deposit.
Stimulus checks should not be confused with earned income tax credits, which will typically pay $200-$300 per person.
Some of the popular stimulus checks are those given to US citizens who were financially affected by the Covid-19 pandemic.
7. Insurance Claim Check
An insurance check is traditionally a physical paper document that can be mailed or submitted electronically. The most common types of claims checks are for the medical, vehicle, homeowners’, and renter’s insurance.
In some cases, it may be sent via regular mail, but more often you will get an email with a notification and instructions telling you how to retrieve your money from the website that issued it.
8. Electronic Checks (e-checks)
An electronic check, or e-check, is a payment method that’s available to most banks and financial institutions.
The customer provides only bank account information (account number) in order to make the deposit, which reduces the chance of error.
e-checks are the same as paper checks with one exception: pre-authorized deductions will not be taken automatically from an account via e-check.
For example, if you have a direct deposit for your salary, it won’t be drawn from your account by an e-check payment because there is no need for it.
Basically, all parties involved in this type of transaction want proof that it has been authorized by both parties before they exchange any money.
It should be noted that electronic checks can be used to pay bills.
9. Giant Check (Dummy Check)
Giant (dummy) checks are the big checks we see people holding in pictures while receiving their lottery wins. They may also be seen where charity organizations are being awarded funds by corporate sponsors.
However, beautiful they look, giant checks cannot be cashed at any bank or check-cashing facility because they are simply for show. That is where they derive the name ‘dummy checks’
10. Counter Check (Temporary Check)
A counter check is a temporary check issued at the same time as a regular payroll check for employees without direct deposit. These transactions are typically deposited into an employee’s account on the same day
A counter check allows employees to spend money right away while they wait for their paycheck to hit their account, and it is a way that employers can be more competitive in recruiting and retaining new staff members.
It also gives employers peace of mind knowing that they have already made sure that someone has enough money – many small businesses issue some or all of their employees’ paychecks through this method.
Counter checks do not require extra funds – the transfer between bank accounts takes place when paychecks are received and processed by the employer’s payroll services department.