Types Of Cheques
A cheque is a document you can issue to your bank, directing it to pay the specified sum mentioned in digits as well as words to the person whose name is borne on the cheque.
Cheques are also called negotiable instruments. In banking terms, a negotiable instrument is a document that promises its bearer a payment of the specified amount either on furnishing the document to the banker or by a given date.
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The issuing party is called the drawer of the cheque, and the one it is issued to or put simply, whose name is mentioned on the cheque is the drawee.
What are the types of cheques?
How many types of cheques are in use depends on elements like who is the issuer and who is the drawee. Based on these essentials, we explore the different types of cheques in India.
1. Bearer Cheque
A bearer cheque is the one in which the payment is made to the person bearing or carrying the cheque. These cheques are transferable by delivery, that is, if you are carrying the cheque to the bank, you can be issued the payment to. The banks need no other authorisation from the issuer to be allowed to make the payment.
How can you identify a bearer cheque? You know it is a bearer cheque when you see the words ‘or bearer’ printed on them.
2. Order Cheque
In these cheques, the words ‘or bearer’ is cancelled. Such cheques can only be issued to the person whose name is mentioned on the cheque, and the bank will do its background check to authenticate the cheque bearer’s identity before releasing the payment.
3. Crossed Cheque
You may have observed cheques with two sloping parallel lines with the words ‘a/c payee’ written on the top left. That is a crossed cheque. The lines ensure that irrespective of who presents the cheque, the payment will only be made to the individual whose name is written on the cheque, in other words, the a/c payee along with his/her account number. These cheques are relatively safe because they can be encashed only at the drawee’s bank.
4. Open cheque
An open cheque is basically an uncrossed cheque. This cheque can be encashed at any bank, and the payment can be made to the person bearing the cheque. This cheque is transferable from the original payee (the original recipient of the payment) to another payee too. The issuer needs to put his signature on both the front and back of the cheque.
5. Post-Dated Cheque
These types of cheques bear a later date of being encashed. Even if the bearer presents this cheque to the bank immediately after getting it, the bank will only process the payment on the date mentioned in the cheque. This cheque stands valid past the mentioned date, but not before.
6. Stale Cheque
A cheque past its validity, three months after the date of being issued, is called a stale cheque.
7. Traveller’s Cheque
Foreigners on vacations carry traveller’s cheques instead of carrying hard cash, which can be cumbersome. These cheques are issued to them by one bank and can be encashed in the form of currency at a bank located in another location or country. Traveller’s cheques do not expire and can be used for future trips.
8. Self Cheque
You can identify self cheques by the word ‘self’ written in the drawee column. Self cheques can only be drawn at the issuer’s bank.
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9. Banker’s Cheque
A bank is the issuer of these types of cheques. The bank issues these cheques on behalf of an account holder to make a remittance to another person in the same city. Here the specified amount is debited from the bank account of the customer, and then, the cheque is issued by the bank. This is the reason banker’s cheques are called non-negotiable instruments as there is no room for banks to dishonour these cheques. They are valid for three months. They can be revalidated provided specific conditions are met.
