What is Bank of Montreal Order Cheques, and How Do They Work?
If you consider using cheques as a mode of payment, you should know the different Bank of Montreal cheques. Some common types are Banker’s cheques, post-dated, crossed, traveler’s, bearer, and order cheques.
An order cheque is a cheque whereby the word “bearer” gets canceled. Other order cheques bear the word ‘or order’ after the payee’s name. The words mean that the bank can only pay the payee’s account appearing on the cheque – not other people’s accounts.
This guide explores the facts about order cheques from the Bank of Montreal, including how they work. So, read on to learn everything about Bank of Montreal order cheques.
Understanding How Bank of Montreal Order Cheques Work
You can turn a regular cheque into an order cheque by canceling the word ‘bearer’ on it. Then, when deposited, the bank makes payments to the name present in the document. Other times, the payee can authorize another person to receive the cash in writing.
Since an order cheque binds the bank only to pay the named payee, financial institutions ask for identity from the cheque holder. The payee will give out their ID number and signature, written on the back side of the cheque.
The bank will verify the holder’s identity by performing a background check. Then, they will check if the ID number presented is correct and if the signature matches the one produced during the opening of the account.
Also, the paying cashier must verify that they are releasing funds to the proper payee of an order cheque. Releasing the cash to the wrong account can hold the cashier accountable and cost them their job.
The payee of an order cheque can transfer it through endorsement. They can endorse an order cheque in favor of another person, and the third party must sign to cash the cheque. Therefore, the bank will not be responsible for any claims.
Difference Between Order Cheque and Bearer Cheque
Order cheques are easily confused with bearer cheques, but the two differ. For bearer cheques, the bank is not bound to the person to release the cash. The cheque is also ready to pass to another person without endorsing it.
So, What’s a Bearer Cheque?
A bearer cheque contains the words’ bearer’, and the person presenting it to the bank can cash it out for payment. No endorsement is required to transfer a bearer cheque. It can be transferred ownership through delivery.
Since there is no specific payee of the bearer cheque, the bank does not ask for any identification details or do a background check. However, the cashier will ask the bearer to sign the back of the cheque to confirm receipt of the funds for safety purposes.
When paying the bearer, the bank or cashier won’t take any precautions to ensure they transfer the money to the right owner. However, you must provide proof of identity, like an ID number, if you withdraw a considerable amount.
So, since anyone can withdraw funds using a bearer cheque, you must keep it safe before handing it to the payee. If the cashier makes payment to an account of a bearer cheque thief, they are not liable for it.
Note that you can easily convert a bearer cheque to an order cheque. You can achieve that by crossing the word ‘bearer’ on the document. However, you cannot convert an order cheque into a bearer cheque.
Benefits Of Bank of Montreal Order Cheques Over Other Cheques
Some advantages you’ll get from using order cheques over other cheques are;
Order cheques restrict the bank from making payments to the specified payee, making them more secure. That means unauthorized people cannot cash the cheques, protecting the payer and payee.
The bank verifies the presented documents to ensure they make payments to the right person. If the cashier cannot match your identity with the one provided in the payee section, they’ll not honor the cheque.
2. Easy to identify drawee
The bank can easily trace the order cheque drawee if there are complaints. Banks pay the specified person for order cheques, and the payee must produce identification documents.
Besides, the bank can also identify the final recipient if there was a cheque transfer. If the payee transfers the cheque to another party, the final recipient must sign to show they are the drawee.
3. Suitable for making significant payments
Since only the specified payee can draw money with an order cheque, it is safer to make significant payments.
Besides, if fraud is involved, the bank can trace the drawee because they must provide their documents for identification. The cashier is liable for paying an unauthorized person with an order cheque.
Making significant payments with a bearer cheque can be tricky since anyone can be the payee. You’ll also be unable to track the drawee because the bank doesn’t demand identity.
Disadvantages Of Using Order Cheques
Although there are benefits of using order cheques, some downsides are;
1. Difficulty in Cashing Out
When you present an order cheque, the bank only makes payments if they are satisfied that you are the payee. You must provide your identification documents, like an ID card and signature.
You’ll not get the cash if you do not have identification documents or the bank has difficulties verifying you as the payee. However, unlike bearer cheques, you don’t need to reveal your identity or credentials to the bank.
You can only transfer order cheques through endorsement. The initial payee must sign after moving the cheque to another person, who must also sign to show they’re the new payee. While this provides security, it can inconvenience people in different locations.
3. You cannot convert it to a bearer cheque
You convert a cheque into an order cheque by crossing the word bearer. That means that only the provided payee can cash out the cheque. However, once you convert a cheque into an order cheque, you cannot change it to a bearer cheque again.
Therefore, if you made a bearer order cheque but want to change your mind, you must write a new cheque.
How Much Does Cashing a Cheque Cost?
The cost of cashing a cheque depends on the bank and the type of cheque. For example, BMO charges a $10 fee for a cashier’s cheque and a $5 fee for paying using a money order.
While these charges seem high, they can be more when paying using foreign currency. That’s because banks such as the Bank of Montreal use a higher foreign currency conversion rate, meaning you will spend more dollars on the conversion fee.
To save more, use Knightsbridge FX to exchange your currency. Exchanging money on our platform is quick and straightforward. We also offer more favorable exchange rates than banks and exchange agencies, meaning you will save more dollars.
A safer way to use Bank of Montreal cheques for money transfers is by converting them into order cheques. You can do this by crossing the word ‘bearer’ on the cheque to make it cashable by the payee only. Once the payee presents the document to the bank, the cashier checks their ID to ensure they are the correct payee, making the cheques safer.