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A cheque is a written, dated, and signed secure slip of paper indicating an agreement to pay another individual or organization a designated sum of money. When you write a cheque, you’re instructing the bank to make that payment. When the cheque is cashed, money is withdrawn from your chequing account. Although cheques are increasingly being replaced by other forms of electronic payment, they are still commonly used by Canadians to pay landlords for rental housing, by businesses that don’t accept electronic payments, and for personal payments, such as a birthday gift to a relative or money owed to a friend.
Cheques are typically sold in books of 50, 100 or 200 and can be ordered for an additional fee, either through your bank or directly through a cheque printing company.
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Premium chequing accounts that charge a higher monthly fee may include cheques as part of the package, but most basic chequing accounts require you to pay extra to order cheques. Depending on the style and quantity of cheques ordered, a chequebook can cost between $25-$70, plus taxes and shipping.
It’s a well-kept secret that you aren’t required to order cheques through your bank. Many people automatically go through their bank because of convenience, and may not realize it’s cheaper to order directly from independent cheque printers. Banks don’t actually print the cheques themselves—they take your order and send it to a cheque printer, resulting in a marked-up price. Ordering directly through a reputable third-party supplier such as ASAP Cheques, Cheque Direct or Action Forms can be much cheaper, especially if you use cheques frequently for personal or business and buy in bulk. For example, a book of 200 personal cheques from ASAP Cheques costs just $13.
If you’re in a pinch and don’t have any cheques handy, you can ask a teller at your bank for a counter cheque, which is a blank cheque printed in the branch with your account information on it. You may be charged a small fee, around $1-$2 per cheque. Counter cheques are meant as an emergency fix, so don’t rely on them on a long-term basis. You can only get a few at a time, and they aren’t always accepted as payment by merchants because they’re basic and appear less secure.
A stop payment is a request made by an account holder to a cancel a cheque or pre-authorized debit payment that has not yet been processed by the recipient. Stop payments may be requested because the account holder wrote a cheque for the wrong amount, decided to cancel a purchase after sending payment, or because they realized they don’t have enough money in their account to cover the payment. A stop payment order will cost the account holder a fee, usually around $12-$20. A stop payment order cannot be issued if the cheque has already been cashed.
Some banks charge more for a stop payment if you’re missing some details about the cheque, such as the date it was written, cheque number, and exact amount. Here’s a breakdown of the stop payment fees charged by some of Canada’s most popular banks:
|Financial institution||Full details available||Details not provided|
|RBC Royal Bank||$10.00||$10.00|
|Bank of Montreal||$12.50||$20.00|
When your chequing account doesn’t have enough money in it to cover a cheque or debit transaction, it’s deemed to have non-sufficient funds (NSF). An NSF cheque is a cheque that cannot be honoured because of insufficient funds and is usually referred to as a bounced or bad cheque. When you write a cheque from an account with insufficient funds, the bank can reject the payment and charge you an NSF fee, or it can cover the transaction and charge you an overdraft fee. NSF fees are quite high—most financial institutions charge around $45 per transaction.
To avoid being dinged by NSF fees, keep track of your account balance and don’t write cheques that you can’t afford to be cashed. Besides annoying the payee and costing both sides time and money, NSF cheques leave a black mark on your credit history for six years. Moreover, you could face criminal charges if you knowingly write bad cheques to commit fraud or obtain credit under false pretenses.
A certified cheque is a cheque that is guaranteed by the issuing bank to have enough money set aside to cover the payment. Certified cheques are generally required when a business doesn’t know the buyer’s credit situation and doesn’t want to risk taking a personal cheque that could bounce. When you certify a cheque, the bank “holds” the funds, guaranteeing the recipient that the cheque will be paid. The fee for getting a cheque certified is $10-$20, unless it’s included as part of your monthly banking package. Because the money has already been debited from your account, you usually can’t stop payment on a certified cheque.
Cheques continue to be a useful form of payment because they’re secure and leave a paper trail, but there are several alternatives for sending payments:Money orders
Similar to a cheque, a money order is payment slip directing that a specific sum of money be paid to a designated payee. Money orders are useful for people who don’t have a chequing account because they’re paid for up front in cash, so there’s no risk of bouncing. Unlike cheques, money orders do not contain any personal information about the purchaser and are more difficult to track. Money orders cost $5-$8 and can be purchased at banks, credit unions, and even through Canada Post. To prevent money laundering and fraud, the amount of money that can be sent via money order is capped at $999.Bank drafts
Similar to a money order, a bank draft is prepaid with a specified amount. However, there are two key differences: drafts are made for amounts over $1,000, and the bank is the entity actually making the payment. When a customer orders a draft, the specified amount is withdrawn from their chequing account and held by the bank to guarantee payment—basically, you give the bank money, and it writes a cheque for you. Unlike money orders, only banks can issue drafts because they’re the ones making the payment. Bank drafts are usually used for payment when dealing with other banks, transactions with a high sale price, or transactions taking place between different cities or countries. Unless its included in your chequing account package, drafts typically cost around $7.50 each.Interac eTransfer
Interac e-Transfer is an online service Canadians can use to send money almost instantly between personal and business accounts at participating banks, credit unions, and other financial institutions—it’s kind of like sending money via email. Unlike cheques, funds from an e-Transfer are available immediately in the recipient’s account and aren’t subject to a hold period. Because the funds are debited immediately from the sender’s account, e-Transfers cannot bounce. Each transfer typically costs $1-$1.50.Payment apps
Apps such as PayPal, Apple Pay, and Google Wallet are increasingly popular as people seek to make cashless transfers and payments using their computer or mobile device. These apps allow you to send and receive money all over the world, as well as spend money electronically on online shopping. Most attractively, sending, receiving, and spending money via these apps is free.Direct deposit
Rather issuing a paper cheque, funds can be deposited directly into your account electronically. Direct deposit is most popular among employers for issuing paycheques because the funds are automatically deposited on specified dates and the funds aren’t subject to a waiting period. For example, to set up direct deposit with your employer, you would provide them with a void cheque from the account you want your money deposited into.