Have you just received your cheque in the mail and now you are curious to learn how to read a cheque? Have you just relocated from another country and you are wondering how to read the Canadian cheque?
Whatever your reason, if you’ve ever asked yourself “How do I read a Canadian cheque?” or “How do I read my cheque numbers”? you’re not alone.
Cheques are still used regularly in Canada, despite the availability of online payment systems or even debit cards. But reading and writing cheques can be tricky.
In order to read a cheque correctly, there are several key things that need to be taken into account. Stick around and let me tell you everything you need to know on how to read a cheque.
How to Read a Canadian Cheque in 8 Easy Steps
An important part of knowing how to read a cheque is understanding the different parts of the check. The ability to properly read a cheque could come in handy when you least expect it.
I will use this cheque as a point of reference to explain how to read a cheque.
1. Read The Personal Information of the Issuer
This is the part that read John W. Doe in the sample above. This section contains the personal information of the checking account owner.
The account owner can be an individual or a business entity, but the funds will be paid from the account of the person stated here. This is the issuer of the cheque.
If you need to contact the cheque issuer, you can use the information here.
2. Read The Date Box
At the top right corner of the cheque is the date the cheque was originally issued or written. Sometimes, the date is a future date, and this means you may not be able to cash it until that future date. These types of cheques are called post-dated cheques.
3. Read The Recipient’s Line
There is the part of the cheque that reads “pay to the order of”. That is where the name of the recipient or the beneficiary of the cheque goes. This person will be doing the cheque cashing.
This part is very important. If your name as an individual or (business) entity contains any error, you will not be able to cash the cheque.
4. Read The Dollar Box
This is the box that shows the dollar ($) sign. This part carries the information on the amount that you can cash with this cheque.
5. Read The Amount Of The Cheque Written In Words
This is the part that clearly states the amount to be cashed in words. This part is very important and it will reveal if the cheque has an error or has been tampered with.
Imagine if I wanted to issue a check for $20, but I added another 0 in error. Phew! Have I just issued a cheque for $200?
Absolutely…NOT! Inasmuch as I have filled in the amount in words, there will be no room for any misunderstanding, right?
Exactly! This is the official worth of that cheque, and this amount is what you will be paid regardless of what is in the Dollar box.
6. Read The Memo Line
This is the part that contains the information on the objective of the cheque. For instance, if the cheque is for rent in the month of April, this part will document it as the reason the cheque was issued.
7. Read The Signature Line
This section shows who signed the cheque. If the cheque doesn’t have a signature, you may not be able to cash it.
8. Read The MICR-Encoded Numbers Line
The final piece in the puzzle of knowing how to read a cheque properly is for you to understand the sequence of numbers contained in it. The following are the 4 numbers you need to read:
1. Cheque Number: This is the identity of the cheque. It is a necessity on every cheque.
2. Transit Number: This is a 5-digit number that is also known as the Branch number. This number lets you know your home branch which is where you initially opened your bank account.
Your transit number will never change, and you will always retain the same number even if you relocate and start using your local branch. The only way this number will change is if you close that account and open another one.
3. Institution Number: Next up is the institution number or the institution code which is the bank identifier. This number lets you know the bank you are set up with, and the number is unique to each bank.
The institution numbers for the five biggest banks in Canada are:
- Bank of Montreal (BMO): 001
- Scotiabank: 002
- Royal Bank of Canada (RBC): 003
- TD Canada Trust: 004
- Canadian Imperial Bank of Commerce (CIBC): 010
4. Account Number: You are most probably used to this. This is simply the bank account number assigned to you by the banking institution. This number is a unique identifier of your bank account, and it allows you to make transactions. It is usually 7 digits or more.
This number is what set apart Canadian cheques from American cheques. An American cheque will have this number, but a Canadian check will not.
In Canada, your routing number is a combination of the 5-digit transit number, dash, and the 3-digit institution code (read points two and 3 for further clarification).
What is the MICR Encoding Line?
Have you ever wondered why bank machines are able to process cheques so quickly? The answer is that all the information they need is stored on this line at the bottom of the cheque.
The line is called the MICR line, which stands for Magnetic Image Character Recognition. The ink that is used in this area isn’t just regular ink; it’s magnetic ink. With this ink, computers know how to read a cheque.
When a bank processes your check, it passes through a machine that reads the information encoded in the magnetic ink and uses it to complete your transaction.
The magnetic ink character recognition system was invented by two scientists at IBM who were seeking a solution to the problem of massive backlogs in paper processing in the 1950s.
The solution they came up with was to create a high-speed character recognition system that could reliably read characters printed in magnetic ink. Today, popular Canadian banks (like the Royal Bank of Canada and many others) use it.
By developing this system and successfully marketing it to banks and other institutions that needed to clear large volumes of checks quickly and efficiently, they paved the way for one of today’s most important technological innovations in online banking.
How Does It Work?
Computers can read characters on a cheque irrespective of whether they have been covered with signatures, stamps, or cancellation. This is all thanks to the magnetic ink which is positioned right above the bottom of the cheque.
This technology is very useful when carrying out automated clearing of cheques. Many financial institutions use MICR technology. In addition, they are made in a way that makes it easy for people to read and understand them. So, if you want to know how to read a cheque, this technology makes it easier.
Cheques generally use unique fonts named E-13B and CMC-7. In Canada (and the rest of North America), the E-13B is what is adopted. This font type is also adopted in Australia and the UK. As for the CMC-7, they are used in South America and Europe.
Cheques are a dying service but, despite being set to become obsolete in the very imminent future, they’re still an essential part of how we manage our money. Being well-versed in how to read and write a cheque means you get to deal with it less often and that it will actually work when you do require it.
So, if you’ve ever thought that checking was never going to be worth your time, think again. After reading this handy guide, you might even change your mind and get back into the habit of using cheques on a regular basis, because you are now an expert on how to read a cheque.
Related: What is a Void Cheque.
FAQs On How To Read a Cheque
Can Cheque Books Expire?
The simple answer is no. Your checkbooks themselves do not expire. However, the cheques within them do.
Once you’ve written a cheque, it usually has six months before it turns “stale.” This means that the payee has six months to present it to the bank before it is considered expired.
Once a cheque becomes stale, it can still be presented to the bank and honored or returned unpaid at their discretion. If you have received a cheque that is nearing its sixth month of age, we recommend contacting your payee to see if they will either cancel it or write you a new one.
What Is the Cost of a Chequebook?
If you plan on writing a lot of cheques, the cost of a checkbook can really add up. The price will vary depending on your bank and how many cheques are in each book. If it’s a favorable price, you can expect to pay $25 for a book.
If it’s a not-so-favorable price, you may pay as much as $70 for the same number of cheques. These checkbooks usually contain anywhere from 10 to 25 cheques. If you need more than one book at a time, your bank will usually provide them.
Contact your bank to find out how much checkbooks cost and what the terms of payment are.
Why Are Cheques Still Relevant in This Age of Electronic Transfers?
You’ve most probably heard of e-transfers. They’re popular, they’re easy and they’re usually free. So, you are probably asking yourself, “why do I have to know how to read a cheque?” The downside of e-transfers is that they aren’t always the most convenient option. In fact, there are some situations where writing a cheque is actually more advantageous than sending an e-transfer. How do we know?
There are limits placed on how much money you can send via an e-transfer. These limits can vary depending on who you bank with and what type of account you have.
For example, one bank may allow you to send up to $5,000 while another might only allow $3,000. Cheques don’t have monetary limits. If the amount is written on the cheque and it’s correct, nothing else matters. You can make deposits and withdrawals when you want with cheques.