Definition§
A stale cheque is a cheque that has not been presented for payment within a prescribed period, generally six months from the date it was written. In the United Kingdom, banks will refuse to honour such cheques, returning them marked as ‘out of date’. This rule helps to mitigate the risks of cheques being left outstanding for prolonged periods and to ensure that financial records are kept up to date.
Examples§
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Personal Cheque: John writes a cheque for £100 to Mary on January 1st. Mary forgets to deposit the cheque until July 15th. When she presents the cheque to her bank, it is rejected as stale because more than six months have passed since the cheque’s date.
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Business Cheque: An employee receives a cheque reimbursing business expenses dated February 1st. Due to a delay, the cheque is not deposited until August 5th. The bank returns the cheque unpaid, marking it ‘out of date’.
Frequently Asked Questions (FAQs)§
Q1: Can a stale cheque be reissued? A: Yes, the drawer can issue a new cheque if they are still obliged to make the payment. The stale cheque serves as evidence that the original payment attempt was made.
Q2: Does the period for a cheque to go stale vary by country? A: Yes, while six months is standard in many places, some countries might have different time frames. Verify with local banking regulations.
Q3: What should I do if I receive a stale cheque? A: Contact the issuer of the cheque to inform them that the cheque has gone stale and request a new one.
Q4: Can banks make exceptions to honour a stale cheque? A: Policies may vary; some banks might honour a stale cheque if the drawer provides authorization, but this isn’t guaranteed.
Q5: Are travellers’ cheques subject to this rule? A: No, travellers’ cheques usually do not fall under the same restrictions and may not have expiry periods.
Related Terms§
- Post-Dated Cheque: A cheque with a future payment date, which cannot be cashed until the date stated on it.
- Bearer Cheque: A cheque payable to the person in possession of it, rather than to a named payee.
- Cancelled Cheque: A cheque that has been used and cancelled by the bank, serving as proof of payment.
- Cheque Bounce: A situation where a bank returns a cheque unpaid due to insufficient funds in the issuer’s account.
Online References§
Suggested Books for Further Studies§
- “Understanding Bank Cheques and Banking Practices” by Jerald Pine
- “Bank Management and Financial Services” by Peter Rose and Sylvia Hudgins
- “Accounting and Finance: Principles for Business Decisions” by Marshall Adams
Accounting Basics: “Stale Cheque” Fundamentals Quiz§
Thank you for exploring the technicalities surrounding stale cheques with our comprehensive overview and engaging quiz. Continue your learning journey in the financial world!
