Cheque is a very common form of negotiable instrument. If you have a savings bank account or current account in a bank, you can issue a cheque in your own name or in favour of others, thereby directing the bank to pay the specified amount to the person named in the cheque. A cheque is a document which guarantees the payment of a specific amount of money on demand to a certain person or to the bearer of instrument.. You can use this printed form to make payment from your bank account. When you write a cheque you enter the amount of money and who is to be paid to, sign and hand it over to the person you want to make payment to. Your bank then pays the money to that person (payee) from your account.
There are many different types of cheque’s available within financial institutions which serves different purposes. Broadly speaking, Cheque are of different types. Some of them are:-
Types Of Cheques
When the words "or bearer" printed on the cheque is not cancelled, the cheque is called a bearer cheque. A bearer cheque is made payable to the bearer i.e. it is payable to the person who presents it to the bank for encashment. However, such cheques are risky, this is because if such cheques are lost, the finder of the cheque can collect payment from the bank. Bearer cheque can be transferred by mere delivery; they need no endorsement. In simple words a cheque which is payable to any person who presents it for payment at the bank counter is called ‘Bearer cheque’.
When the word "or bearer" printed on the cheque is cancelled and and the word ‘order’ may be written on the cheque, the cheque is called an order cheque. An order cheque is one which is payable to a particular person. The payee can transfer an order cheque to someone else by signing his or her name on the back of it.
New Cheque Format – CTS 2010
Uncrossed / Open Cheque
When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque". These cheques may be cashed at any bank and the payment of these cheques can be obtained at the counter of the bank or transferred to the bank account of the bearer. An open cheque may be a bearer cheque or an order one.
Crossing of cheque means drawing two parallel lines on the left corner of the cheque with or without additional words like "Account Payee Only" or "Not Negotiable". A crossed cheque cannot be encashed at the cash counter of a bank but it can only be credited to the payee’s account. This is a safer way of transferring money then an Uncrossed or open cheque.
Cheque in which the drawer mentions the date earlier than the date on which it is presented to the bank, it is called as "anti-dated cheque". Such a cheque is valid upto six months from the date of the cheque. For Example, a cheque issued on 10th Jan 2010 may bear a date 20th Dec 2009.
Post Dated Cheque
Cheque on which drawer mentions a date which is yet to come(future date) to the date on which it is presented, is called post-dated cheque. For example, if a cheque presented on 10th Jan 2010 bears a date of 25th Jan 2010, it is a post-dated cheque. The bank will make payment only on or after 25th Jan 2010.
If a cheque is presented for payment after six months from the date of the cheque it is called stale cheque. After expiry of that period, no payment will be made by banks against that cheque.
When a cheque is torn into two or more pieces and presented for payment, such a cheque is called a mutilated cheque. The bank will not make payment against such a cheque without getting confirmation of the drawer.