A cheque is a written instruction to your bank to pay a specific amount of money in a specific currency from a bank account held in your name with that bank.  The person issuing the cheque on a current or cheque account is the drawer, instructing the bank (known as the drawee bank) to pay a sum of money to the payee on the cheque.

To write a cheque you need to:

  • be an account holder and have the bank’s authorization to make payments by personal cheque;

  • deposit a specimen signature at the bank so that it can check the signature on the cheque is authentic;

  • have enough money in your account to cover the cheque. Issuing a bad cheque has serious consequences.

To check whether the signature is authentic, the bank compares it with the specimen signature deposited on a special form on the day the account with the bank was opened.

Normally, cheques are valid for six months unless otherwise stated on the cheque itself. A cheque is considered as stale if more than six months have elapsed on the issuance date.

Cheques are not legal tender – if you owe someone money, that person is not obliged to accept a cheque. Instead a creditor is entitled to be paid in legal tender and can refuse payment in any other form.

Types of cheques

    • Customers’ cheques

      Issued by customers, should preferably be deposited into an account of the payee. However if cheques need to be encashed these should be presented at the branch where the account is held.

    • Bankers’ Draft

      Also known as Cashiers’ Cheque or Bank Cheque. It is a cheque written by one bank drawn on itself, making it more acceptable to a payee as means of payment. The issuing bank guarantees that it will pay the payee when the cheque is presented and cleared. A bankers’ draft is issued at a fee.

Issue of a cheque without availability of funds

A bank can only honour payment on an issued cheque if there are funds available in the account. Otherwise the bank will not affect the payment and the cheque will be sent back to the payee with the words “Refer to drawer”. In this case a cheque is dishonoured or bounces and is considered by the bank as unauthorised borrowing. The bank will charge the drawer a fee for informing him/her about any unauthorised borrowing. The drawer’s account may also be charged interest for the time the account is overdrawn.

It is imperative that cheque account holders do not issue post-dated cheques. Should a post-dated cheque be presented at any of a bank’s branches, the account-holder cannot hold the bank liable for any incurred damages or fees, whether the cheques are honoured or returned unpaid.

Stop payment of a cheque

You can exercise this facility when you want to stop the payment of a cheque you have lost or which is believed to be stolen. In such a case you must:

  • Inform in writing the branch where your account is held; and

  • Ensure that your branch has clear details which correctly identify the cheque you wish to stop.

You can also bar the payment of a cheque using internet banking, if your bank provides such a service. If your cheque book has been stolen, you need to phone your bank’s 24 hour call centre immediately.

A bank will not normally impose a charge if a cheque is returned unpaid for the following reasons:

  • Absence of an endorsement;

  • Irregular endorsement;

  • Payment is countermanded;

  • Cheque is torn;

  • A bank stamp is required;

  • Cheque is wrongly listed;

  • Drawer is deceased.

A Code of Conduct drawn up by the Malta Bankers Association and endorsed by some local commercial banks encompasses the banks’ duties to customers and third parties in respect of cheques and cheque handling. This Code of Conduct is viewable here.

Unfortunately cheques are a tempting target for criminals to steal money or goods from the drawer, payee or the banks. Banks encourage their cheque account holders to be vigilant and thus prevent cheque fraud. It is imperative that whilst writing a cheque, measures are taken to make it difficult to alter it after it is drawn.

Types of cheque fraud

  • Counterfeit cheque: it is printed on non-bank paper to look exactly like genuine cheques and are drawn by a fraudster on genuine accounts;

  • Forged cheque: a genuine cheque that has been stolen from an innocent customer and used by a fraudster with a forged signature;

  • Fraudulently altered cheque: a genuine cheque that has been made out by the genuine customer, but a fraudster has altered the cheque in some way before it is paid in, e.g. by altering the beneficiary’s name or the amount of the cheque.

Keep in mind…

  • Never accept a cheque, or bank draft from someone, unless you know and trust them.

  • Be especially wary when accepting a high–value cheque (e.g. if you are selling a car).

  • If a cheque turns out to be stolen, fraudulently altered or counterfeit, the bank has a right to reverse or reclaim any amounts credited to your account.

  • It is safer to ask for payment for high–value items to be made by other means (as an internet banking payment or a bank transfer). However there may be charges in settling the transaction in this manner. If the “buyer” is unwilling to pay the relatively small cost involved – or to split it with you – then you really do need to be on your guard.

  • Scams involving cheques may also involve the fraudster offering a cheque or bank draft for significantly more than the price of the goods. As ever, anything that sounds too good to be true should set alarm bells ringing, but the fraudster’s excuse may sound plausible. This type of scam may involve the seller being asked to transfer the amount of the overpayment either to the fraudster, or to a third party after three days when, it is claimed, the cheque will be cleared. It is likely that the cheque or banker’s draft is fraudulent. The banks do all they can to spot and stop such cheques and drafts in the clearing system. However, with this scam, the cheque might not be genuine. The paying bank will therefore return the cheque unpaid and reverse any funds placed in an account. If the customer has already made the overpayment to a third party (usually by means of a money transfer service), he will end up losing out financially (and the fraudster bagging an amount of money fraudulently).

  • A bank’s draft is not necessarily safe from fraud. They can be stolen or altered like any other cheque, and if altered, stolen or counterfeit they will not be honoured. If you receive a bank draft in payment for goods, you should wait until you have certainty that the draft has been cleared. Only after you obtain such certainty from your bank should you release any merchandise.

  • Keep your chequebook in a safe place, report any missing cheques to your bank immediately and always check your bank statement thoroughly. Ensure to write the details of the cheque on the stub to facilitate reconciliation.

  • Fraudsters target cheques where there is any unused space in the payee line. This type of fraud means there are no signs of obvious alteration, reinforcing the importance of drawing a line through all unused spaces when writing out a cheque.

To establish particular timeframes and relevant charges involving cheques by local commercial banks please click here.

It is imperative that account holders are knowledgeable of their obligations regarding the operation of their accounts as formulated in their contractual relationship with their respective bankers. Usually the contractual relationship is referred to as the General Terms and Conditions.