Bank Cheques in UAE Explained!

By Sakshi Srivastav - 02 Sep 2021 Last Updated: 19 Sep 2021
Bank Cheques in UAE Explained!

If you have never lived in the UAE previously, you may not be aware of the country's use of cheques. Even if you've lived in the UAE and used bank cheques before, you might not be up to date on everything. In any case, we recommend that you read this chapter and understand more about cheques.

So without any further ado, let’s learn!

All about Bank Cheques and its Procedure.

First and foremost, a bank cheque is a kind of payment similar to a debit card or cash, with the exception that it is not an instant payment. If you receive payment from me, you will have the funds immediately available. It's not the same with a check. Before I may get monies in the amount mentioned on the check, I must first deposit it in my bank account and wait a day or two for the cheque to clear and the funds to be placed into my account. Cheque payments are widely accepted in the UAE, and businesses regularly use them to pay for services or commodities, office rent, or the purchase of office equipment.

What happens when you open a Business Account?

  • When you start a business account, you'll normally be asked if you want to order a check book in addition to your debit or credit card. The first cheque book is normally provided free of charge and contains 50 to 100 leafs or cheques. All subsequent cheque books will be subject to a fee, which varies by bank. Each leaf of a cheque book or a cheque has multiple lines and places where you can fill in the following information: first and foremost, the name of the party you are paying. This name should be written in the same way as it appears in the bank. Any discrepancies in spelling will result in the bank returning the check.
  • After that, you provide the amount in words, followed by the amount in figures. If there are any problems and the amount in figures does not match the amount mentioned in words, the check will be returned. A signature spot is always available in the right bottom corner.
  • The signature you use on the check should be the same as the one you used when you applied for your corporate bank account. We've noticed that many businessmen have extremely sophisticated signatures that change every time they sign. To avoid any problems with your bank account, we recommend that you generate a signature that is easy to duplicate.
  • If you know you won't be able to recreate all those curves and moves with your previous signature, ask your banker for a particular banking form for adopting an alternative signature, and don't forget it. If you sign your cheque in a way that differs from what you reported at the bank, the cheque will be returned with the notation "signature mismatch."

Following Steps

  • Finally, you must date the cheque once you have filled out the payee's name, paid amount, and signed it. You have the option of entering today's date, in which case this check will be referred to as current-dated. It implies you can deposit the check into your bank account as soon as you have it in your hands. You can also specify any future date, in which case the check will be called post-dated, indicating that you will be allowed to deposit the check no sooner than the date on the check.
  • Current-dated cheques are used to pay for products and services right now, whereas post-dated cheques serve as a promise that you will be paid the amount on the specified date in the future. Post-dated cheques are frequently used to pay for office rent.
  • For example, if you issue the first cheque for the first three months of rent as current dated, say January 1, then three post-dated cheques for April 1, July 1, and October 1, you will have paid for the first three months of rent. Again, this means that your landlord will deposit the first check right away, and the appropriate amount will be taken from your account the next day. The next payment will be taken on April 1st, then July 1st, and finally October 1st.

Important things you should know as a Business Owner

On the one hand, you do not need to have this money right now to issue a post-dated cheque in a specified amount. However, before the person or entity to whom you donated it gives it to his bank, you must confirm that you have it.

If you do not have enough funds before that time, the bank will return your check with a letter stating, "insufficient funds," and any checks that do not clear will be considered a criminal offence. This means that if the person you provided the check to presented the check to his bank and there were insufficient funds, the payee can approach the UAE Police. As a result, you must exercise extreme caution and take checks very seriously.

We listed the grounds for cheque return as we listed the facts you must include on the check:

  • inaccurate payee's name,
  • mismatch in amounts
  • incorrect signature
  • insufficient money.
  • What's more, if you issue a cheque as a payment to someone and the cheque is returned for one of the reasons listed, your bank will charge you a fee for cheque processing. The fees charged by various banks differ.

General Conditions for Business Accounts

  • When you open a Business Account, you'll also decide how many signatories you'll have and whether they'll be able to act individually or jointly with the bank. What's the connection to the checks?
  • When you sign a cheque to offer it to someone as payment, there is a spot for signature. If you have two partners who work together, both of them must sign the check. If both have the authority to act alone, however, one signature on the check would suffice.
  • If you received a payment in the form of a check, you must deposit it into your bank account. You can do it in a couple of ways: you can use a specific ATM machine that accepts checks, or you may go to a branch and give over the check over the counter. The first option is always the most practical.

You'll also hear the term "cash check" frequently. This is the same conventional cheque we just discussed, but instead of the payee's name, it says "CASH." For example, suppose your corporate debit card has a limit of AED 10,000 and you urgently need to purchase AED 15,600 worth of office equipment. You won't be able to withdraw this money from an ATM, and submitting instructions to the bank to pay cash will take time. Instead, type "cash" in the payee name field, fill out the rest of the check as usual, and deliver it to your bank. This sum will be deducted from your account instantly, and you will be paid AED 15,600 in cash.

At the same time, we've noted that several banks have begun to create policies stating that they will no longer accept such checks after a particular date. Many banks, however, continue to provide the service. We strongly advise you to only utilize the service when absolutely essential.

Conclusion

Thus we hope this blog provided you with incite full information on how to handle cheques and all it related procedures in United Arab Emirates. For more information on other related aspects, feel free to check out our Website as well.

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