1---
 2meta: 
 3  date: false
 4  reading_time: false
 5title: "Cheque"
 6date: 2023-10-29
 7description: "A written order by a customer to a bank to pay cash, or to transfer money on deposit to another account."
 8tags: ["Banking", "Payment Methods", "Finance"]
 9---
10
11## Background
12
13A cheque is a written instrument that orders a bank to pay a specific amount of money from the drawer's account to either the person or entity named on the cheque or to the holder of the instrument. It functions as a tool for transferring money, offering an alternative to cash and digital transactions.
14
15## Historical Context
16
17Cheques have a storied history, originating as early as ancient Rome and gaining modern prominence in the 17th century in England. They were initially adopted for their convenience and served as the backbone of many banking transactions through the 20th century. However, reliance on cheques has waned with the advent of electronic banking and card payments.
18
19## Definitions and Concepts
20
21- **Drawer**: The person who writes the cheque.
22- **Payee**: The person to whom the cheque is made out.
23- **Drawee**: The bank or financial institution where the drawer's account is held.
24- **Overdraft Facility**: A credit arrangement allowing the drawer to issue cheques beyond the available balance.
25
26## Major Analytical Frameworks
27
28### Classical Economics
29
30Classical economists typically viewed cheque usage positively, emphasizing the role of institutions in facilitating trade and commerce via banking instruments like cheques.
31
32### Neoclassical Economics
33
34Neoclassical analysis focuses on the liquidity and convenience provided by cheques, weighing these advantages against the transaction costs and risks, including fraud and unhonoured cheques.
35
36### Keynesian Economics
37
38From a Keynesian perspective, cheques contribute to the money supply and facilitate demand through spending. Their declining usage can be connected to shifts in liquidity preferences and technological advancements.
39
40### Marxian Economics
41
42In Marxian economics, cheques illustrate material relations of production and the embedded power structures within financial institutions, focusing on how banking instruments like cheques serve capitalistic frameworks.
43
44### Institutional Economics
45
46Institutional economists examine the regulatory and social foundations that govern cheque usage, such as banking laws and the standard practices of financial institutions.
47
48### Behavioral Economics
49
50Behavioral economics analyzes how consumer preferences and decision-making behaviors influence cheque usage, especially as digital payment options become more prevalent.
51
52### Post-Keynesian Economics
53
54Post-Keynesian perspectives might explore the role of cheques in stabilizing aggregate demand and ensuring smooth financial transactions, underpinning broader economic stability and growth.
55
56### Austrian Economics
57
58Austrian economists may critique cheque usage based on the principles of voluntary cooperation and market forces, considering how spontaneous order accommodates or rejects certain banking instruments.
59
60### Development Economics
61
62In development contexts, cheques can be seen as tools for financial inclusion, although declining due to digital transformation. The evolution of cheques potentially reflects larger economic transitions in developing economies.
63
64### Monetarism
65
66Monetarists assess cheques as part of the broader money supply, with implications for controlling inflation and ensuring monetary stability through regulated banking practices.
67
68## Comparative Analysis
69
70### Cheques vs. Electronic Payments
71
72- **Cost**: Electronic payments often incur lower transaction costs.
73- **Speed**: Electronic payments are faster, typically processed in real-time compared to the settlement period for cheques.
74- **Accessibility**: Cheques require physical presence while electronic options are digital.
75- **Security**: Cheques may be subject to fraud, whereas online payments have encryption and other security measures.
76
77## Case Studies
78
79- **United Kingdom**: Transition from cheque usage to digital banking.
80- **India**: Impact of policy changes on cheque usage within financial inclusion schemes.
81- **United States**: Observations on credit & debit cards overshadowing cheques.
82
83## Suggested Books for Further Studies
84
851. "Money and Banking" by Robert E. Wright
862. "The Economics of Money, Banking, and Financial Markets" by Frederic S. Mishkin
873. "Payment Systems: Management, Operation, and Regulation" by Zhang Gui
88
89## Related Terms with Definitions
90
91- **Overdraft**: A deficit occurs when money is withdrawn from a bank account beyond the zero balance.
92- **Legal Tender**: Money that must be accepted if offered in payment of a debt.
93- **Credit Card**: A card allowing the holder to purchase goods or services on credit.
94- **Debit Card**: A card permitting direct access to one's bank account to withdraw money or make purchases.