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Cheque Definition Various Types of Cheques and their characteristics

Various Types of Cheques

Cheque Definition: The cheque is a transactional instrument. A transferable tool introduces to a document that ensures that the bearer of such a document will get the sum of money specified in it either on-demand or within a stipulated time mentioned in the document.

What is Cheque?

Cheque Definition: Cheques refer to a document issued by an individual to his or her bank. Individual directing their respective banks to pay the person mentioned in the document the sum specified in it. Such a document needs to be valid. The person who is issuing the cheque, he /she must have an account in the related bank. The person who acts as an issuer of the cheque is called a drawer. And the person to whom it is issued is the drawee.

What is the Purpose of a Cheque?

The purpose of a cheque which is a negotiable instrument is to ensure smooth monetary transactions as per the required specifications. Nowadays cash is the widely used method of payment but if somebody has to do the payment in the upcoming date then it is the best payment method. Based on different factors we have different types of cheques. Let’s have a look at them.

Some of the most common types of Cheque

Bearer cheque

It is payable to the bearer of the cheque or whose name is written on it. It has “or bearer” printed at the end of the dotted lines. Which is meant to have the name of the drawee. Also, It has the speciality that it can be presented over the counter of the drawee bank and is payable to the one presenting it. It is an easily exchangeable instrument and so it can be passed on to another by mere delivery. That is why these cheques are not considered to be secure.

Order Cheque

Order cheque indicates to the cheque in which the printed word “bearer” is excluded thereby making it payable only to the person whose name is written in the place of drawee. Once the drawer cancelled the “bearer” on the cheque, it is automatically understood that this is an order cheque and the bank is directed to only complete the transaction once they have identified, to their satisfaction, the bearer of the cheque is the same person, as named in it.

Crossed Cheque

It refers to the cheque in which the drawer makes two parallel transverse lines at the top left corner of the cheque. He may or may not mention “a/c payee”. By performing so, it makes sure that no matter who presents the cheque to the drawer bank, the transaction is made into the account of the person named in the cheque only. This type of cheque is recognised to be safe as it reduces the risk of money being given to an unauthorized person because this type of cheques can only be cashed by the drawee’s bank.

Open Cheque

Open cheques refers to the cheques that are not crossed. That is why it is also known as uncrossed cheque. It can be presented by anyone whosoever found it or get it to the drawer’s bank and receive the payment. The person having this, can further transfer it to another person and can easily make him the drawee. It can only be open by not cutting the word open. The person who is issuing It must ensure his/her signatures on both the front and the back of the cheque. Otherwise, a bank can deny the payment to the payee. Bank also makes the payee sign at the back of the cheque while receiving the amount.

Post Dated Cheque

It refers to as Post Dated Cheque when it is bearing a later date than the one on which it is issued. The person can present this at any time at the bank but no transaction will take place before the date specified. If you present these cheques after the date mentioned on it, it will still be valid and you can still make the payment.

Stale Cheque

This refers to the cheques which are past its validity period and can no longer be encashed. Earlier, the period was six months from the date of issue. Now, this period has been reduced to three months.

Travellers’ Cheque

These are recognized or are equivalent to a universally accepted currency. It is available almost everywhere and comes in various denominations. It acts as a tool issued by the bank itself to make payments from one place to another. The pros of this cheque are that there is no expiry date of it. And thus it can be used during your next travel as well. Also, you also have the choice to encash it once you land back in India.

Self Cheque

It is the cheque where the drawer normally issues a self-cheque to himself or her self. The name column should be filled by the word “self”. Any person can issue it when the drawer wishes to withdraw money from the bank. it can only be encashed in the account owner’s or the drawer’s bank. It is important to take precautions with this as if it is lost. Anyone may easily get it encashed by visiting the drawer’s bank.

Mutilated Cheque

 It refers to the cheques which are turned into two pieces or mutilated. In such a case, the bank does not make payment unless they get a confirmation from the drawer.

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Last Updated: July 7,2020 12:00:28 AM

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