There are many facets which one should be clear about, when they decide to start their business in the UAE like Company Formation Regulations, Licensing and Documentation etc. similarly they should be well versed with all the necessary Banking requisites with respect to account opening, account management, cheques, international transfers. Being familiar with how Bank Cheques operate in the UAE can save you a lot of time and headaches.
In this blog, Dhanguard will extensively discuss everything about the Bank Cheques in the UAE. So without any further ado, let’s learn!
What are Bank Cheques?
The first thing to understand is that a bank cheque is a type of payment method, much like a debit card or cash, with the difference that it is not an instant payment. In the case of Debit or a Credit Card, if the payment is made, the other person instantly receives the funds but that's not the case with payments made by a cheque.
In order to make the payment, the payer must deposit the cheque entitling the payee to receive a certain amount. Then the said cheque will be cashed by the payee in the coming days (preferably 1 - 2 Business Days) and the amount will be reflected in the bank account of the payee. Cheques are frequently used by businesses in the UAE to pay for goods or services, office rent, or the purchase of office supplies. Cheques are often regarded as the general form of payment all over the United Arab Emirates.
How to write a Cheque in UAE?
The question of whether you want to order a cheque book in addition to your debit or credit card will typically be requested of you when you open a business account. The first cheque book is typically given away without charge and has 50 to 100 leaves or cheques. A fee, which varies by bank, will be charged for each additional book of checks.
Follow the below mentioned procedure to avoid a faulty cheque-
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The following information can be filled in on each leaf of a cheque book or cheque, including the name of the party you are paying at the beginning of the cheque where it reads “To”.
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This name must be spelled exactly as it appears in the bank. If there are any spelling errors, the bank will return the cheque
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The next step is to specify the amount of money to be transferred to the payee in alphabets as well as in numerics. The check will be returned if there are any issues and the amount expressed in figures differs from the amount stated in words. In the bottom right corner, there is always a space left out to make the signatures.
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The payer should sign the cheque with the same signature he used to apply for his business bank account. It is usually noticed by most of the banks in UAE that a lot of businessmen render different signatures each and every time they write a cheque. We advise you to create a signature that is exclusive to you but at the same is easy for you to remember in order to prevent any issues with your bank account.
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If you are aware that you won't be able to replicate your prior signature, ask your banker for a specific banking form for using an alternative signature, and make sure to keep it in mind. Your cheque will be returned with the notation "signature mismatch" if you sign it differently than how the Bank has your signature in its record.
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After writing out the payee's name, the amount paid, and your signature, the payer must mention the date sheque.
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Optionally, the payer can enter the current date, in which case this cheque will be referred to as current dated. It suggests that once you get the cheque in your hands, you can deposit it right away into your bank account.
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The check will therefore be referred to as post dated, meaning that payer are only permitted to deposit it no earlier than the date printed on the check.
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The payer can even choose any future date in this scenario.
Post dated cheques act as a promise that you will be paid the amount on the given date in the future as opposed to current dated cheques, which are used to pay for goods and services immediately. The payment of office rent is usually made with post dated cheques.
Relevant factor for Business Owners to be aware regarding Bank Cheques in UAE
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You can write a post dated check for a specific amount without having the money available immediately away, on the one hand. You must verify that you own it, though, before the person or organization to whom you contributed it hands it over to his bank.
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If you do not have adequate funds before that time, the bank will return your cheque and issue you a notice declaring that there are "insufficient funds," and any checks that are not clear will be viewed as a criminal offense.
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This means that the payee can contact the UAE Police if the person you sent the check to presented it to his bank and there wasn't enough money. You must thus proceed with the utmost prudence and take cheques very seriously.
Along with the information required on the cheque, we also included the reasons why a cheque can be returned:
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incorrect payee's name
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discrepancy in the amounts
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wrong signature
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lack of funds
Furthermore, your bank will charge you a fee for cheque processing if you write a cheque as payment to someone and the cheque is returned for one of the mentioned reasons. Different banks impose different fees.
What is a Cash Cheque?
The term "cash check" will also be used frequently. This conventional cheque is similar to the one we just examined, but instead of the payee's name, it states "CASH." As an illustration, let's say your business debit card has a limit of AED 10,000 and you urgently need to buy AED 15,600 worth of office supplies. This money cannot be withdrawn at an ATM, and it will take time for the bank to receive instructions to pay in cash. Instead, write "cash" in the payee name field, complete the rest of the check as usual, and deliver it to your bank. You will receive AED 15,600 in cash and this amount will be instantly debited from your account.
Several banks have started to establish policies declaring that they will stop accepting such checks after a specific date, which is something we've noticed at the same time. However, many banks still offer the service. You should only use the service when it is absolutely necessary, as we strongly suggest.
Conclusion
Cheques can be helpful as a major tool to make your hefty business transactions, which are otherwise difficult when done through Cash or Credit or Debit Card. We have mentioned every useful information you would require to make use of Cheques for your Payments in the UAE. Thus, we hope this blog provided you with insightful information. For more information on other related aspects, feel free to check out our website or visit our head office as well.
