Cheques can be classified according to its type. Order cheques specifically contain a sum written on the cheque itself and paid to a specific person or the payee named in writing on the cheque. Cheques can also be paid to its bearer, in which case no name is written on the addressee but could contain “cash” as its recipient. Thus if no name is written on the cheque, it is considered negotiable for the bearer. Another type of cheque is one that is drawn on the bank itself and is often used on secure transactions or for the payment of a large purchased item.
When the issuer issues a check for payment, the bank considers this as an instruction to release funds to the drawer and will be paid upon verification of the necessary details considering that there is sufficient money to handle the withdrawal. Cards provide another avenue in the settlement of bills. Credit cards are actually provided by the lender/issuer for the consumer’s use. Credit cards do not require the balance to be paid in full on a monthly basis because the client has the option to have his balance revolved at the cost of having interest charged.
Usually when a payment is made, the card user agrees to pay the card issuer by signing a receipt with a record of the card details and the amount to be paid. Another process now accepts verbal authorizations via telephone and electronic authorization using the web service. When presented for payment, cheques are verified and go through a complicated series of events from the bank to a clearing house where the bank officials swap all the cheques that have accumulated between two banks.
Credit cards are however commonly verified through an electronic system that allows merchants using the magnetic strip that holds information in the card to check its validity , credit sufficiency and verification in one swipe to accept the settlement. His signature on the receipt denotes his conformity to the transaction and at the same time is a proof of service availment in debit cards and a proof of indebtedness towards the credit card issuer in credit cards. In credit cards, payment is deemed expected after the cardholder signs the receipt.
The merchant submits the signed receipt to the issuing bank for payment which normally happens within three to five banking days. With cheques, it is only possible to get paid when the cheque has been verified by the issuing bank himself. Sometimes, the issuing bank may also refuse to make payment on a cheque more specifically when there are insufficient funds to cover the amount of the cheque or when the important details are not properly filled up in the cheque itself like missing dates, discrepancy in the written sum and the figures indicated.
This also holds true when the issuer has issued a post dated cheque making the cheque negotiable only after the indicated date. This may also be declined when the payer has stopped the cheque or when there is reason to believe that the payer does not have the mental capacity to write the said cheque or when the issuer is subject to a bankruptcy petition.