The Banks

The use of Cheques

Cheques are still a common way of paying for goods although the number of cheques being used is gradually reducing as debit and credit cards are used more. In 1998, three billion cheques were processed but this is expected to fall to 1.9 billion by 2008. Blank cheques are issued to customers by banks and, although they may seem to be just a piece of paper, they are in fact a legal document which allows the account holder to pay a specified sum of money to the person or organization named on the cheque. Cheques are not a new idea, they were first used towards the end of the 1,600s.

Three billion cheques a year represents almost 100 cheques being written every second of every day. With so many cheques it would be impossible to process the information without the use of computers and so a special method was devised for inputting the data into the computer. Because cheques involve the transfer of money, the data input used had to be very reliable.

The method devised uses an ink holding tiny magnetic particles which can be read directly into the computer through a reader. This method of data entry is ‘called magnetic ink character recognition (MICR). Characters written in magnetic ink. Payment by cheque is still common for paying bills over the counter or by post and for payments between businesses.

The illustration above shows three groups of magnetic ink numbers printed on the bottom of the cheque. These numbers represent:

• the cheque number (each cheque in the cheque book is stamped with its own number)
• the sort code for the account holder’s bank (each bank and branch has its own unique number)
• the customer's bank account number.

Before the cheque is passed for processing, also known as ‘clearing’, a fourth number is added by the bank using a printer with the special magnetic ink. This last number is the amount the cheque has been made out for.

© LEV