What happens if I issue a cheque and my account does not have sufficient funds?
When a cheque is issued with insufficient funds in the account, the customer runs the risk that the cheque may not be honoured. For a cheque that is dishonoured due to insufficient funds, there are two types of fees imposed by banks. Firstly, a handling/ administrative fee is charged for the return of the cheque, and secondly, a charge is imposed for incidental overdraft (“OD”) interest. The second charge of incidental OD interest is to cover the bank’s loss in overnight interest.
When a cheque is drawn on a bank (“payer’s bank”) and deposited at another bank (“payee’s bank”), the payee’s bank would have to send the cheque for clearing to claim the proceeds of the cheque from the payer’s bank. Under the cheque clearing system in Singapore, the payer’s bank will pay the proceeds of the cheque to the payee’s bank on the day the cheque is cleared and the account of the payer will be debited on the same day. If the account has insufficient funds, the bank may not honour the cheque.

The decision to honour or return the cheque is made on the next business day. Hence, if the bank decides to return the cheque, the reversal entry, that is, the credit back to the payer's account, will be valued the next business day. Thus, the payer's account will show an overdraft on the day the cheque was cleared because the reversal entry is made only on the next business day. The amount of the cheque has been funded by the paying bank on the day the cheque was cleared and the bank was therefore “out of pocket” when there were insufficient funds in the payer’s account. An overnight incidental OD interest charge is thus imposed on the overdrawn balance in the account. Notwithstanding that the payer may not have a pre-arranged OD facility, his account will automatically go into an overdraft position due to insufficient funds.
The banks’ standard Terms and Conditions do provide for them to levy the necessary interest charges if the account goes into an overdraft position due to insufficient funds. We understand that banks in Hong Kong and Malaysia similarly levy the two charges for returned cheques due to insufficient funds.

Finally, customers are advised to monitor their accounts regularly and to issue cheques only when there are sufficient funds in their accounts, in order to avoid incurring bank charges and incidental OD interest.

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Can I encash a cheque at a branch of the bank other than the one which issued the cheque?

Many retail banks in Singapore do allow customers to encash cheques at branches other than at the home branch of the account holder, although for control reasons, limits could be placed on the amount to be withdrawn. However, There are a few banks that do not allow encashment other than at the home branch as they do not have a customers' signatures on-line verification system.
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Are there any safeguards which recipients of cheques can take against the cheques being subsequently dishonoured?

It is the general practice for the party accepting personal cheques to sight the identity card of the payer and record his personal particulars, including address and telephone number. Businessmen should know that personal cheques can bounce due to various reasons and if they accept personal cheques, then they must know that they are accepting the risks attached. Any business, as a matter of prudence, should conduct its own credit assessment of the parties it deals with before entering into a business transaction and agreeing on the mode of payment. Banker's cheques or cashier's orders are available to those who need assurance that payment would be honoured.
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What is the banking practice relating to cheques that are not crossed, with the payee's name/NRIC number indicated and the word "bearer" cancelled?

As a general rule, if the word "bearer" is deleted and the cheque is not crossed, banks would allow only the named payee to obtain cash for the cheque.

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