What is Cheque in Bank And Types of Cheque

What is Cheque in Bank & Different Types of Cheque

 

**What is a cheque?**

A check is a written document that instructs a bank to pay a specific amount of money to a specified person or entity. Checks can be used to deposit or withdraw money from a bank account, or to make payments to other people or businesses. A check has several features and types, which are explained below:

👉 **Features of Cheque:**

🏦The check must be issued by an individual or organization having a current or savings account with the bank. The person issuing the check is called the drawer of the cheque.

🏦The check must bear the name of the person or entity who will receive the money from the bank. The recipient of the check is called the payee.

🏦The amount to be paid in the check must be in both words and figures. The amount should be the same in both the forms, otherwise the check may be rejected by the bank.

🏦Checks must bear an issue date, which is the day the check is written by the issuer. A check is generally valid for three months from the date of issue, unless it is a post-dated cheque.

🏦The check must bear the signature of the person issuing the cheque, which is proof of their identity and consent to pay the amount. The signature must match the signature registered with the bank, otherwise the check may be dishonored by the bank.

🏦 Checks may also contain other details, such as bank name, branch, account number, check number, MICR code and IFSC code. These details help the bank identify and process checks faster and more accurately.

👉 **Types of Cheque:**

1. Open Cheque 

Open Cheque is a check that can be cashed by the payee at a bank, or deposited into his own account, or sold to another person. Open checks have no restrictions on who can receive the money, and it can be transferred easily. However, open checks also carry the risk of loss or theft, because whoever has the check can claim the money.

2. Underline Cheque 

Underlined Cheque is a check which has two parallel lines drawn on the upper left corner, with or without a word between them. A crossed check can only be deposited into the payee's account, and cannot be cashed directly at the bank. A crossed check provides greater security to the check issuer and the recipient, as it prevents check fraud and misuse.

3. Order Cheque 

Order Cheque is a check in which the name of the payee is followed by the word "or order", or the word "bearer" is crossed out. An order check can be cashed or deposited only by the payee, or by someone to whom the payee has endorsed the cheque. Order checking ensures that the money reaches the intended person or entity and not someone else.

4. A/C Payee Cheque 

Account Payee Cheque is a check which has the words "Account Payee" or "A/c Payee" written between two parallel lines of crossed cheque. An account payee check can only be deposited into the account payee's account, and cannot be endorsed to anyone else. Account Payee Check provides the highest level of security and protection to the check issuer and recipient, as it prevents any alteration or diversion of the cheque.

5. Bearer Cheque 

Bearer Cheque is a check in which the name of the payee is followed by the word "or bearer", or the word "bearer" is not crossed out. Bearer checks can be cashed or deposited by any person holding the cheque, irrespective of the name of the payee. A bearer check is similar to an open check, but does not require identification of the holder. Bearer checks are convenient and easy to use, but they also carry a high risk of loss or theft.

5. Self Cheque 

Self Cheque is a check bearing the word "self" or the name of the payee as payee. Self-cheques can be encashed only by the payee in the bank, and cannot be deposited into any account. Self-cheques are used by the drawer to withdraw money from his or her own account, or to transfer money from one account to another within the same bank.

6. Post Dated Cheque 

Post Dated Cheque is a check which has a future date as its date of issue. Post-dated checks cannot be encashed or deposited till the date mentioned on the cheque. Post-dated checks are used by the payer to postpone payment to a later date or to meet a future financial obligation. A post-dated check is valid for three months from the date of issue unless it is dishonored by the bank before that.

A pre-dated check is a check which has a previous date as the date of issue. A pre-dated check can be encashed or deposited within three months from the date of issue unless it has been dishonored by the bank before that.

7. Pre Dated Cheque 

**Pre-dated Cheques are used by the payer to make backdated payments, or to avoid any penalty or interest for late payment.

8. Traveller Cheque 

Travellers Cheque is a check issued by a bank or financial institution to a traveller, who can use it to purchase foreign currency or goods and services in a foreign country. A traveler's check is pre-printed with a fixed amount and the issuer's signature, and can be exchanged for cash or goods. any authorized agent or merchant. A traveller's check provides convenience and security to the traveller, as it can be easily replaced if lost or stolen.

9. Banker's Cheque 

Banker's Cheque is a check that is issued by a bank on behalf of the drawer, who pays the amount to the bank in advance. A banker's check is payable to the payee on demand, and it is guaranteed by the bank. A banker's check is used by the drawer to make a large or urgent payment, or to transfer money to another bank. A banker's check is also known as a bank draft, a pay order, or a demand draft.

10. Mutilated Cheque 

 Mutilated Cheque is a check that is torn, damaged, or defaced in such a way that it affects the validity or clarity of the cheque. A mutilated check may be rejected or dishonored by the bank, unless it is verified and certified by the drawer or the bank. A mutilated check may be caused by accidental or deliberate actions, such as spilling, tearing, burning, or erasing.

11. Blank Cheque 

Blank Cheque is a check that is signed by the drawer, but does not have any other details filled in, such as the name of the payee, the amount, or the date. A blank check can be filled in by the payee or anyone else, and it can be cashed or deposited without any limit or restriction. A blank check is the riskiest type of cheque, as it can be used or misused by anyone who has the cheque.