‘Stale cheques’: Can my cheques expire? If yes, how long are my cheques good for?
Cheques don't actually expire, but one older than six months old can be considered ‘stale’
Dubai: Cheques are known to be financial instruments without a strict end date. However, personal cheques do become ‘stale’ after a certain point, usually six months after it has been issued. Here’s why.
‘Stale’ cheques are outdated cheques issued to the bank after the date of payment has lapsed. Nevertheless, a cheque becoming ‘stale’ is not quite the same thing as expiring.
This is because banks are not required to cash or deposit ‘stale’ cheques, even if they could. Whether or not the cashing institution accepts or refuses a ‘stale’ cheque is largely at the bank's discretion.
The maker of a cheque is referred to as the 'drawer' and the 'drawee' is the one directed to pay. The 'payee' is called the individual named in the instrument, to whom it is paid by the instrument. A cheque is a negotiable instrument that, by endorsement, maybe further exchanged and is payable on demand.
What does it mean for a cheque to be ‘stale’?
Most financial institutions around the world consider cheques that haven’t been cashed or deposited within six months of their writing to be ‘stale’. But why? This is mostly a means of consumer protection.
The reason being when people write a cheque, they usually assume that the money will be withdrawn by the recipient immediately.
If the cheque isn’t deposited on time, the cheque writer might forget about it and his or her account balance could dip too low.
In such instances, the cheque could bounce, or at least surprise the account holder and negatively impact his or her budgeting and finances.
Can ‘stale’ cheques be still be encashed?
When it comes to personal cheques, the decision of whether to honour a ‘stale’ personal cheque is usually a matter of the bank's discretion. If one of the parties involved has been a long-time customer, cashing may not be a problem.
In other cases, the cheque might be held for a ‘waiting period’ or refused outright. A waiting period gives the bank the opportunity to contact the cheque writer’s financial institution and possibly the cheque writer, before deciding how to proceed.
However, when it comes to business cheques, those written on behalf of corporations are often printed with ‘invalid after’ dates near the signature line.
Sometimes the validity period is as long as six months, but it can be much shorter. Sixty days is a typical time frame, particularly for large cheques such as payroll contributions or major reimbursements.
Can post-dated cheques become ‘stale’?
Then what about post-dated cheques? How does this time limitation apply to these cheques? Among the types of cheques that are widely misunderstood, post-dated cheques are one of them.
Post-dated cheques are those drawn with a future date written on it. It is no different from any other cheque apart from the fact that it is post-dated for the purpose of being honoured at a future date.
It is used primarily to make a deposit at a later date. The cheques cannot be honoured by the banks before the date mentioned on the cheque.
Here’s are some examples: Assume the date today is January 27 and you are writing a cheque. Generally, if you write a cheque, you will write the current date of the cheque i.e., January 27.
But when you write a date which is later than the current date, say you write a date of a cheque as February 3, this is when it becomes post-dated cheque. Here’s another scenario.
Suppose a cheque was issued on February 5, but the date stated on that cheque is February 25. Such a search may be encashed on or after February 25, and not before that. These are post-dated cheques.
(Separately, an ‘ante-dated’ cheque is when you write a date on a cheque that is older than the date on which it is delivered to the bank.)
While ‘stale’ cheques are outdated cheques issued to the bank after the date of payment has expired, post-dated cheques may be dated in the future, it may be months or years from the date of issue.
While post-dated cheques are dated in such a way that they can only be cashed in in the future, after six months from the issuance date, these cheques too become stale.
Key takeaways
The validity of a post-dated cheque in the UAE is six months from the date specified on the cheque. Likewise, each country has unique laws about the issuance and authenticity of a post-dated cheque.
When the period of validity ends, the cheque becomes ‘stale’. So when an individual hands it to the bank for payment after it has ‘expired’ (outdated or lapsed), a cheque is considered to become ‘stale’.
When a cheque is issued and is dated January 20, in the UAE, it is valid until June 20, which is exactly six months after the date of issue which is referred to by the bank as the final date of payment. After June 20, it will be considered as a ‘stale’ cheque and it will not be honoured by the banks.
Such cheques are most often recommended by experts to not be submitted to the bank for payment. If they are submitted for payment, the likelihood of them being dishonoured by the bank is high. Banks often don't support these cheques due to the validity norms set by the central bank.
In short, for clearance or deposit of a cheque in the UAE, any cheque with a date that is not exceeding six months may be presented to the bank.