Types of Cheque

Types of Cheque

1. TYPES AND CROSSHING OF CHEQUE l. Prakash Kannan, M.Com., M.Phil.,(Ph.D.), Assistant Professor, S. J. Monisha, II B.com,.

2. cheque A cheques is a document issued by an individual to his or her bank, directing them to pay the person whose name is mentioned in the document the sum specified in it for such a document to be valid, it is important that the person issuing it has an account in the said bank. An issuer of the cheque is called drawer, and the one to whom it is issued is the drawee.

3. Types of cheque

4. Bearer Cheque The bearer cheque is a type of cheque in which the bearer is authorized to get the cheque encashed. This means the person who carries the cheque to the bank has authority to ask the bank for encashment. This type of cheque can be used for ash withdrawal. This kind of cheque is endorsable. No kind of identification is required for the bearer of the cheque. Order Cheque This type of cheque cannot be endorsed i.e., only the payee, whose name has been mentioned in the cheque is liable to get cash for that amount. The drawer needs to strike the “OR BEARER” mark as mentioned on the cheque so that the cheque can only be encashed to the payee.

5. Crossed Cheque In this type is cheque, no cash withdrawal can be done. The amount can only be transferred from the drawer’s account to the payee’s account. Any third party can visit the bank to submit the cheque. In case of a crossed cheque, the drawer must draw two lines at the left top corner of the cheque. Open Cheque When a cheque is not crossed, it is called an “ Open Cheque” or an “Uncrossed Cheque”. These cheques may be encashed 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 bearer cheque or order cheque.

6. Post – dated Cheque Cheque on which the drawer (a person who writes the cheque) mentions a date which is yet to come (future date) rather than the date on which the cheque is presented, then such a cheque is called a post- dated cheque. Stale Cheque If a cheque is presented for payment after six months from the date of the cheque, it is called a stale cheque. After expiry of that period, no payment will be made by banks against that cheque.

7. Travelers' Cheque These may be equated with a universally accepted currency. A travelers’ cheque is available almost everywhere and comes in various denominations. This is an instrument issued by the bank itself to make payments from one place to another. There is no expiry date of a travelers’ cheque and thus it can be used during your next travel as well, or you have the option to encash it once you land back in India. Self Cheque The drawer usually issues a self-cheque to his or her self. Th name column of the drawee has the word “self ” written in it. A self-cheque is drawn when the drawer wishes to withdraw money from the bank in cash for his use. This cheque can only be enchased in the account holder’s or the drawer’s bank. This cheque must be used carefully because if it is lost, another person may easily get it encashed by visiting the drawer’s bank.

8. Bankers Cheque A banker’s cheque, as is self-explanatory here, is a cheque issued by the bank on behalf of the account holder in order to make payment of a specified sum, by order, to another person within the same city. It is valid only for three months form the date of issue, but if needed, can be re-validated upon fulfilling certain legal obligations.

9. Crossing of cheques A crossed check is any check that is crossed with two parallel lines, either across the whole check or through the top left-hand corner of the check. This double-line notation signifies that the check may only be deposited directly into a bank account. Therefore, such checks cannot be immediately cashed by a bank or by any other credit institution.

10. Types of crossing

11. General crossing Section 123 of the Negotiable Instruments Act 1881 defines General crossing as: “Where a cheque bears across its face an addition of the words “and company” or any abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines simply, either with or without the words “not negotiable”, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed generally. Two parallel transverse lines are drawn on the face of the cheque, generally, on the top left corner of the cheque. Holder or payee cannot get the payment at the counter but through the bank only. Including the name of the banker is not essential, hence, the amount can be encashed by any banker. The words, “& Company”, “Not Negotiable”, A/C. Payee” may or may not be written. It can be converted into special crossing.

12. Special crossing When a particular bank’s name is written in between the two parallel lines the cheque is said to be specially crossed. In addition to the work bank, the words “A/c. payee only”, “Not Negotiable” may also be written. The payment of such cheques is not made unless the bank named in presenting the cheque. The effect of special crossing is that the bank makes payment only to the banker whose name is written in the crossing. Specially crossed cheques are more safe than a generally crossed cheques.

13. Double crossing Double crossing cheque is crossed specially to more than one banker except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof. A double-crossed cheque shall be paid by the banker if the second banker acts only as of the agent of the first collecting banker and this is clearly state on the cheque. i.e., crossing must specify that the banker to whom it was particularly crossed again acts as the first banker’s agent for the purpose of collecting the cheque.

14. Thank you