Dear Reader, cheques are an integral part of banking. Cheques are safe means of transacting amounts between payer and payee. To improve your banking awareness, you should know about the types and key definitions regarding cheques.
In the end, you will find a short practice test with 5 questions.
Before seeing the 12 types, below is a small introduction.
A cheque is nothing but a written order issued by an account holder directing a bank to pay a certain sum of money to an individual or company and also for cash withdrawals from the bank. In other words, the cheque is an important document to transfer money through the bank.
The issuer and receiver of the cheque should have either a savings or current account with the bank. A cheque transaction is one of the safest ways of making payments because you can trace back the transactions when necessary.
After opening a savings or current account with the bank, you will get a bunch of cheque leaf. Using these leafs, you can make payments or even pay your bills.
Must Know Things Regarding a Cheque: (You will see the types and explanation after this brief section.)
Drawee – A bank or institution where the cheque must be drawn.
Drawer – The person who is issuing the cheque.
Payee – The person who is the recipient of the cheque
Amount – The currency amount that must be mentioned in both words and figures.
Date – A cheque can be realized starting from this date. (There will be a limit on the number of days until which the cheque is valid.)
Signature of the drawer – (You don’t need an explanation for this!)
12 Types of Cheques With Explanation
- Bearer Cheque:
Bearer cheque means a person holding this cheque can withdraw amount (provided the cheque is already singed). You can find the word ‘Bearer’ on your cheque leaf. If you do not strike this word, it becomes a bearer cheque. Keeping this type of cheque is very risky. If lost and received by wrong hands you may loose the amount mentioned on the cheque.
- Order Cheque:
Order cheque is payable to a particular person. If the word ‘bearer’ is stricken out, the cheque automatically becomes an order cheque.
In ‘order cheque’ identification of the payee is important. The ID numer, name and signature of the payee will be asked on the back of the cheque.
Now you should be clear on the main difference between bearer cheque and order cheque:
Order cheque – encashed by payee only on giving ID proof.
Bearer cheque – encashed by the holder of the cheque.
- Open Cheque:
It is possible to get money over the counter of the bank using an ‘open cheque’. The person issuing an open cheque can receive payment or deposit the cheque in his account or pass it to someone’s account.
- Crossed Cheque:
If two parallel lines are drawn across the top left corner of the cheque, then it is called a crossed cheque. Here the money is credited directly in payee’s A/C. This cheque can be endorsed to another person. The payee of the cheque should mention the endorsee’s A/C and his name at the back of the cheque. Then the amount is credited to particular person’s account, even if his name was nowhere on the cheque.
For Ex: In Cheque, it’s mentioned as Pay to Anu A/c. Here Anu can transfer the amount to another person named Banu. Anu has to mention Banu name and A/C number with her signature. Then specific amount is transferred to Banu’s A/C.
There are two types of crossing:
i) General Crossing means that cheque can be paid through any bank
ii) Special Crossing means the name of the bank is mentioned on the cheque so that it can be paid only through the named bank.
- A/C Payee cheque:
A/c Payee cheque also contains two parallel lines drawn across the top left corner of the cheque. The only difference is that ‘A/c Payee’ is mentioned between two parallel lines. This cheque is nontransferable, which means that this cheque cannot be further endorsed, and the amount is credited only to payee’s A/C.
For Ex: In a Cheque, it’s mentioned as Pay to Anu A/c. Here amount is credited only to the payee’s A/c.
- Blank Cheque:
A cheque which contains only the drawer signature but not mentioned specific amount to be transferred. Here payee has to mention the amount.
- Mutilated Cheque:
If a cheque is torn into pieces then is called mutilated cheque. If that cheque is presented for payment, the bank will confirm payment after getting approval from the drawer. Sometimes, if a cheque is torn only at the corners and not required data are erased, the bank may make payment.
- Post Dated Cheque:
If any cheque issued by a holder to the payee for an upcoming withdrawn date, then it is referred as post dated cheque.
- Ante-Dated Cheque:
This type of cheque is issued for a past date but presented in bank after that date.
- Self Cheque:
If you issue a cheque at your own name or write self in the place of the payee’s name than that cheque is called a self-cheque.
- Gift Cheque:
This cheque is used for gifting money to the loved ones. The amount may vary from Rs.100 to 10,000.
- Stale Cheque:
A stale cheque is one that is not presented till three months from the stipulated date.
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