There are various types of cheques, which serve as written orders to authorize money transfer from a bank account. When a person, known as the drawer, writes a cheque, they typically hold an account where the funds are deposited. The cheque contains specific details like the monetary amount, date, payee, and is signed by the drawer. This document instructs their bank,Bearer Cheques referred to as the drawee, to release the stated sum of money to the specified individual or company.
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Types of Cheques
Bearer Cheque
A bearer cheque is payable to whoever holds it, indicated by the words “pay to bearer.” The payee doesn’t have to personally present it; they can endorse it by signing on the back and pass it to another person. Anyone who holds this cheque can cash it, and the bank isn’t obligated to verify the bearer’s identity, making bearer cheques risky if lost or stolen.
Order Cheque
An order cheque specifies payment only to the person named on it. The bank verifies the person’s identity presenting the cheque. By striking off the word ‘bearer,’ the cheque becomes an order cheque, making it safer. Cancelling both ‘bearer’ and ‘order’ terms makes the cheque non-negotiable.
Crossed Cheque
Marked with two parallel lines, a crossed cheque directs the payment to the payee’s account, not cash. It’s the safest as it prevents cash payments and credits the amount to the payee’s account. It can have general or special crossing, the latter requiring presentation through a specific bank, and the words ‘not negotiable’ destroy its transferability.
Uncrossed/Open Cheque
An uncrossed cheque can be cashed at the bank counter. It might be a bearer or an order cheque.
Anti-Date Cheque
A cheque dated earlier than its presentation date is anti-dated and is valid for six months from its date of issue.
Post-Dated Cheque
A cheque with a future date isn’t honored before that date. For example, a cheque dated January 25, 2010, presented on January 10, 2010, is post-dated, and the bank will pay on or after January 25, 2010.
Stale Cheque
Presenting a cheque six months after its issue date makes it stale, and the bank won’t honor it.
Mutilated Cheque
A torn or damaged cheque is called a mutilated cheque. The bank won’t pay it without confirming with the drawer.
Bearer Cheque FAQ
A bearer cheque is payable to the person holding it, indicated by “pay to bearer” on the cheque. It can be cashed by anyone holding the cheque.
An order cheque is specific, ensuring payment only to the person named on it. The bank verifies the payee’s identity on presentation.
A crossed cheque has two parallel lines on it, directing payment to the payee’s account, not in cash. It’s the most secure form of cheque.
An uncrossed cheque can be cashed at the bank counter and may be either a bearer or an order cheque.
An anti-date cheque bears a date before the presentation date, while a post-dated cheque has a future date and can’t be honored before that date.