April 23 Notes - Types of Checks Check A draft drawn by a...

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Types of Checks Check- A draft drawn by a depositor ordering a bank to pay a sum certain of money. Cashier’s Check- A check drawn by the bank on itself, rather than on a drawer’s account, which constitutes the bank’s promise to pay the payee on presentment and assumption of liability if the bank fails to pay. Travelers Checks- A check, often used as a substitute for cash, which is drawn on or payable through a bank and payable on demand by the holder. Certified Check- A check that has been accepted by bank prior to presentment. Bank- Customer Relations Creditor-Debtor- When a customer deposits cash into a bank account, she becomes a creditor of the bank, and the bank becomes her debtor, for the amount of the deposit. Agency- When a customer writes a check on her bank account, the bank acts as her agent for the payment. Bank’s Duty to Honor Checks Overdraft- A check written on a checking account in which there are insufficient funds to cover the check -A bank faced with an overdraft has two options 1) Dishonor the item 2) Pay the item and charge the customer’s account, collecting the difference from the next deposit or from the customer’s savings or other account. Postdated Check- A check bearing a future date -A bank may charge a postdated check against a customer’s account upon presentment, unless the customer notifies the bank not to cash until a certain date. Stop Payment Orders
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Stop Payment Order- An order by the drawer to his bank not to pay or certify a certain check. -the order, if made in a timely and reasonable manner, must be obeyed. -a bank making payment over a valid stop-payment order must re-credit the customer’s account, but only to the extent of the actual loss suffered by the drawer because of the wrongful payment. -a drawer who wrongfully issues a stop-payment order will be liable to the payee both for the amount of the check and for any consequential damages incurred by the payee as a result of the wrongful stop-payment order. -except in rare circumstances, payment cannot be stopped on a cashier’s check or certified check. Drawer’s Death or Incompetence A customer’s death does not affect the bank’s authority to honor a check drawn on the customer’s account until the bank 1) Knows of the death 2) Has had a reasonable period of time to act on the info 3) If the bank doesn’t know of the death at the time a check is used or presented, the bank may pay the time. 4) Even when a bank knows of the death, it may still pay or certify checks drawn on for a period of ten days. Forged Drawer’s Signature
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This note was uploaded on 04/29/2008 for the course BUS 101 taught by Professor Kelly during the Spring '08 term at Mercyhurst University.

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April 23 Notes - Types of Checks Check A draft drawn by a...

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