Meaning of Cheque
“Cheque is an unconditional order addressed to a Bank, signed by the drawer of the cheque, ordering bank to pay the drawee with the specified amount as furnished in the cheque.
Classification of cheques:
- Simple Cheque
- Multi-city Cheque
Simple Cheque: A simple cheque that was being used in the past. Payment for such Cheque is made only from Home Branch. Now it is been replaced by multi-city ceque.
Multi-city cheque: A multi-city Cheque is that cheque where the payment can be processed across any branch of a bank across the country. Now days banks are issuing only multi-city cheques.
Bearer Cheque: A cheque is said to be bearer cheque, when the word bearer is not cancelled from the cheque. Payment of such cheque is made to any person whosoever present it to the cashier no matters whether he is the exact same person mentioned as payee in the cheque.
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The bank do not verify the identity of the person who is presenting the cheque to the cashier. The cashier ask the bearer cheque presenter to put his signature at the back of the cheque in his presence.
Such type of cheque is very risky as in case if one receives this form of cheque and lost it and he has no information about this, then finder of this cheque if identifies that it is bearer cheque then he can easily cash the cheque from the bank cash counter. That is different thing that he may be caught thereafter but with regards to safety it is full of risks.
Order Cheque: In this type of cheque the word bearer which is written on the face of the cheque is cancelled by drawing a horizontal line across it (see image ) and “or Order” word is written in place of it. Thus now the cheque is payable to the person whose name is written in place of Pay, or to any one else to whom it is transferred. The bank before encashing the cheque verifies the identity of the person to confirm that the person who is presenting the cheque is the same person as specified in the cheque
Stale Cheque: A cheque is said to be stale when its gets expired after crossing expiry time of 6 month. The bank refuses to pass the stale cheque.
The only option left with the drawer of the cheque for getting the cheque cleared is to either draw a new cheque or writing new date in place of expiry date.
Post Dated Cheque: If the date written on the face of the cheque is a future date, such type of cheque is Post Dated cheques. Payment for such cheque by banks can only be made when that date comes in present.
Blank Cheque: In this type of cheque the drawer put his signature on the cheque and leaves other coloumn blank giving the receiver of cheque chance to fill all entries by him. Such types of cheque signifies trust between the drawer and drawee.
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Self Cheque: When a cheque is drawn to withdraw from own account that type of drawing cheque is called self cheque. Such cheque furnises ‘’self’’ word under Pay coloumn. This type of cheque can be bearer or order. This type of cheque can be cash from bank home branch Other Bank dishonour this type of cheque.
Crossed Cheque or Account payee Cheque: When a cheque contains two parallel transverse lines across with or without any words( like A/C Payee, & Co. ) on the top left hand corner of the cheque, such type of cheques is termed as crossed cheque. In This type of cheque the payment is not done in cash but it is generally transferred in associated bank account of the person specified on the cheque as payee.The receiver of the cheque can either deposit it in his account or endorse it to any other person on the reverse which is not accepted by banks nowdays. This type of cheque is the safest of all other form of cheque drawing as the receiver of the cheque is not made payment by cash but is made by transferring to his bank where he is a customer.
Open Cheque: A cheque that do not contains two parallel lines across on the top left hand corner of the cheque or the cheque which is not crossed is called is called open cheque.
The person receiving the cheque can write the name of another person in place of his name and the payment will be paid to him. The words “Open” on the face of the cheque should not be cancelled and also drawer should sign on the reverse of the cheque before giving it to another person; otherwise the bank may refuse payment. The receiver of the cheque can encash the money from any branch of the bank. The drawee should also sign at the back of the cheque while receiving the amount.