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   Chapter 38 CHEQUES, DRAFTS, AND BILLS OF EXCHANGE[11]

Up To Date Business By Various Characters: 8696

Updated: 2017-12-06 00:03


BANK CHEQUES

Showing cheque raised from $7.50 to $70.50.

A cheque is an order for money, drawn by one who has funds in the bank, payable on demand. Banks provide blank cheques for their customers and it is a very simple matter to fill them out properly. In writing in the amount begin at the extreme left of the line. The illustrations given here show a poorly-written cheque and a copy of the same cheque after it has been "raised." The original cheque was for $7.50 and shows very careless arrangement. It was a very easy matter for the fraudulent receiver to change the "seven" to "seventy" and to add a cipher to the amount in figures. The running line was written in on the raised cheque to deceive the bank. In this case Mr. Carter and not the bank must suffer the loss. Mr. Carter cannot hold the bank responsible for his carelessness. Drawers of cheques should exercise the greatest care in writing in the amount to prevent changes or additions. Draw a running line, thus: ~~~Nine~~~ before and after the amount written in words. If the words are commenced close to the left margin the running line will be necessary only at the right. The signature should be in your usual style familiar to the paying teller. The plain, freely written signature is the most difficult to forge. Usually cheques are drawn "to order." The words "Pay to the order of John Brown" mean that the money is to be paid to John Brown or to any person he "orders" it paid to. By indorsing the cheque in blank (see indorsements) he makes it payable to bearer. If a cheque is drawn "Pay to bearer" any person-that is, the bearer-can collect it. The paying teller may ask the person cashing the cheque to write his name on the back, simply to have it for reference. Safety devices to prevent the fraudulent alteration of cheques are of almost endless variety, but there has not been a preventive against forgery and alterations yet invented, which has not been successfully overcome by swindlers. A machine for punching out the figures is in common use, but the swindler has successfully filled in the holes with paper-pulp and punched other figures to suit his purposes. The safest cheques are those carefully written upon what is known as safety paper.

FOOTNOTE:

[11]A part of the matter of this lesson has already appeared in Part I. of this book ("General Business Information"), but it is here repeated to preserve the connection.

IDENTIFICATION WHEN CHEQUES ARE PAID

The banks of this country make it a rule not to cash a cheque that is drawn payable to order unless the person presenting the cheque is known at the bank-or unless he satisfies the paying teller that he is really the person to whom the money is to be paid. It must be remembered, however, that a cheque drawn to order and then indorsed in blank by the payee is really payable to bearer, and if the paying teller is satisfied that the payee's signature is genuine he probably will not hesitate to cash the cheque. In England all cheques apparently properly indorsed are paid without identification. In drawing a cheque in favour of a person not likely to be well known in banking circles, write his address or his business after his name on the face of the cheque. For instance, if you should send a cheque to John Smith, Boston, it may possibly fall into the hands of the wrong John Smith; but if you write the cheque in favour of "John Smith, 849 Tremont Street, Boston," it is more than likely that the right person will collect it. If you wish to get a cheque cashed where you are unknown, and it is not convenient for a friend who has an account at the bank to go with you for the purpose of identification, ask him to place his signature on the back of your cheque and it is likely you will not have trouble in getting it cashed. By placing his signature on the back of the cheque he guarantees the bank against loss. A bank is responsible for the signatures of its depositors, but it cannot be supposed to know the signatures of indorsers. The reliable identifier is in reality the person who is responsible.

CHEQUES FOR SPECIAL PURPOSES

If you wish to draw money from your own account the most approved form of cheque is written "Pay to the order of cash." This differs from a cheque drawn to "bearer." The paying teller expects to see you yourself or some one well

known to him as your representative when you write "cash." If you write "Pay to the order of (your own name)" you will be required to indorse your own cheque before you can get it cashed. If you wish to draw a cheque to pay a note write "Pay to the order of bills payable." If you wish to write a cheque to draw money for wages write "Pay to the order of pay-roll." If you wish to write a cheque to pay for a draft which you are buying write "Pay to the order of N. Y. draft and exchange," or whatever the circumstances may call for.

CHEQUE INDORSEMENTS

In indorsing a cheque remember that the left end of the face is the top when you turn it over. Write your name as you are accustomed to write it. If you are depositing the cheque, a blank indorsement-that is, an indorsement with simply your name-will answer; or you can write or stamp "Pay to the order of (the bank in which you deposit)" and follow with your signature. Either indorsement makes the cheque the absolute property of the bank. If you wish to transfer the cheque by indorsement to some particular person write "Pay to the order of (naming the person)" and follow with your own signature; or you may simply write your name on the back. The latter form would be considered unwise if you were sending the cheque through the mail, for the reason that a blank indorsement makes the cheque payable to bearer. An authorised stamped indorsement is as good as a written one. Whether such indorsements are accepted or not depends upon the regulations of the clearing-house in the particular city in which they are offered for deposit.

THE NUMBERING OF CHEQUES

A certified cheque.

Cheques should be numbered, so that each can be accounted for. The numbers are for your convenience and not for the convenience of the bank. It is important that your cheque-book be correctly kept, so that you can tell at any time how much money you have in the bank. At the end of each month your small bank-book should be left at the bank, so that the bookkeeper may balance it. It may happen that your bank-book will show a larger balance than your cheque-book. You will understand by this, if both have been correctly kept, that there are cheques outstanding which have not yet been presented at your bank for payment. You can find out which these are by checking over the paid cheques that have been returned to you with your bank-book. The unpaid cheques may be presented at any time, so that your actual balance is that shown by your cheque-book. Cheques should be presented for payment as soon after date as possible.

CERTIFIED CHEQUES

A bank draft.

If you wish to use your cheque to pay a note due at some other bank than your own, or in buying real estate or stocks or bonds you may find it necessary to get your cheque certified. This is done by an officer of the bank, who writes or stamps across the face of the cheque the words "Certified" or "Good when properly indorsed" and signs his name. (See illustration, p. 244.) The amount will immediately be deducted from your account, and the bank by guaranteeing your cheque becomes responsible for its payment. If you should get a cheque certified and then not use it deposit it in your bank, otherwise your account will be short the amount for which it is drawn.

BANK DRAFTS

A bill of exchange.

Nearly all banks keep money on deposit in other banks in large commercial centres-for instance, in New York or Chicago. They call these banks their New York or Chicago correspondents. A bank draft is simply the bank's cheque drawing upon its deposit with some other bank. (See illustration, p. 245.) Banks sell these cheques to their customers, and merchants make large use of them in making remittances from one part of the country to another. These drafts or cashiers' cheques, as they are sometimes called, pass as cash anywhere within a reasonable distance of the money centre upon which they are drawn.

BILLS OF EXCHANGE

A draft on a foreign bank is commonly called a bill of exchange. Bills of exchange are usually drawn in duplicate and sometimes in triplicate. (See illustration, p. 246.) Only one bill is collected, the others simply serving in the meantime as receipts. These bills are used to pay accounts in foreign countries, just as drafts on New York or Chicago are used to pay indebtedness at home.

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