Cheques are one of the most commonly used forms of payment in India. They are considered a safe and reliable method of payment in the Indian banking system. However, different types of cheques are used for different purposes. Understanding the different types of cheques available in the Indian banking system can help you make better financial decisions and choose the right type of cheque for your transactions. In this article, we will explore the various types of cheques in the Indian banking system and their significance.
See also: Cheque: Meaning, Characteristics, types, and how do they work
Banker’s Cheque
A bank draft, also known as a banker’s cheque, is a secure payment method issued by a bank for a customer. It guarantees the payment as it is drawn from the bank’s funds, and the funds for a banker’s cheque are debited from the customer’s account at the time of issuance, ensuring that the payment will be honoured. To get a banker’s cheque, you can visit your bank and provide the required details, such as the payee’s name, amount, and purpose of payment. After debiting the corresponding amount from your account, the bank will issue the cheque.
Bearer Cheque
A bearer cheque is a kind of cheque that can be cashed by any person who presents it to the bank instead of being made out to a specific individual or organization. Bearer cheques can be transferred from one person to another via delivery, making them highly convenient for transactions. The key advantage of bearer cheques is that they don’t contain the name of the payee, which offers a degree of anonymity and is useful for individuals who wish to keep their transactions confidential.
Crossed Cheque
A crossed check is a kind of check that bears two parallel lines drawn across its front. This marking indicates that the check can only be deposited into a bank account, and cashing it directly is not possible. The purpose of crossing is to offer an extra layer of protection to both the issuer and the recipient of the check, minimizing the risk of theft and fraud. Crossing checks reduces the likelihood of fraud, and banks have introduced additional measures such as watermarking, holograms, and unique identification numbers to further enhance the security of crossed checks.
Open Cheque
An open cheque, also referred to as a bearer cheque, is a type of cheque that does not state a specific payee name. The person who possesses the cheque can write their name as the payee and cash it at the bank. This type of cheque provides convenience and flexibility for the holder. However, it is crucial to note that open cheques carry a higher risk of misuse or fraud as they are easily lost or stolen. As per the Reserve Bank of India, the maximum amount for an open cheque is ₹50,000. Any amount exceeding this limit requires the cheque to be crossed or payable to a specific payee.
Order Cheque
An order cheque is a type of payment method that can only be paid to the person or organization who is named on the cheque. It is commonly used in India due to its secure and convenient nature. When writing an order cheque, it is important to spell the name of the payee correctly and ensure that it matches the name on their bank account. Order cheques act as proof of payment and provide a record of payment in case of any disputes. They are widely accepted by banks and businesses throughout the country. These cheques can be utilized for various purposes, such as paying rent, making purchases, or transferring funds.
Post-Dated Cheque
A cheque that has a future date written on it is called a post-dated cheque. Such cheques are commonly employed for loan repayments, rent payments, and other types of contractual obligations. Post-dated cheques provide a level of security to the payee, which is one of their primary advantages. They also benefit the payer by enabling them to effectively manage their cash flow. By post-dating a cheque, the payer has the freedom to plan their expenses accordingly.
Ante-Dated Cheque
An ante-dated cheque is a cheque with a date that is earlier than the current date and is commonly used in India for financial transactions that have a timeline. It is important to understand the legal implications of issuing an ante-dated cheque before doing so. Buyers in real estate transactions often issue ante-dated cheques to the seller as a guarantee of payment on specific dates. This helps maintain transparency in the transaction and assures the seller.
Self-Cheque
A self-cheque is a type of cheque that is issued by the account holder themselves, drawing from their bank account. This is a simple and direct method of withdrawing money or transferring funds without involving any third party. Opting for a self-cheque offers a sense of reassurance since it ensures that the funds are directly transferred to the account holder’s bank account. It also serves as a valuable tool for tracking personal expenses and maintaining accurate financial records. In India, self-cheques are widely used for various purposes such as paying bills, making charitable donations, and transferring funds to other accounts.
Stale Cheque
When a check is too old, it is known as a stale cheque and cannot be honoured by the bank. In India, a cheque is considered stale when it is presented for payment after three months from the date it was issued. Once this period has passed, the bank can refuse to pay, and the cheque will no longer be valid. To avoid any inconvenience caused by stale cheques, it is important to keep track of their validity period. The validity period is usually mentioned on the cheque itself by the banks.
Traveller’s Cheque
When travelling, using a traveller’s cheque is a secure and hassle-free way to carry money. These cheques come pre-printed with a fixed amount and can be used as payment in many countries. Traveller’s cheques are widely accepted and can be replaced easily in case they are lost or stolen. They can be conveniently exchanged for local currency at banks or currency exchange offices.
FAQs
What is a banker's cheque?
A banker's cheque is a form of secure payment method issued by a bank for a customer. It guarantees payment as it is drawn from the bank's funds and is debited from the customer's account at the time of issuance, ensuring that the payment will be honoured.
What is a bearer cheque?
A bearer cheque is a type of cheque that can be cashed by any person who presents it to the bank instead of being made out to a specific individual or organization.
What is a crossed cheque?
A crossed cheque is a type of cheque that bears two parallel lines drawn across its front, indicating that the check can only be deposited into a bank account, and cashing it directly is not possible.
What is an open cheque?
An open cheque, also known as a bearer cheque, is a type of cheque that does not state a specific payee name. The person who possesses the cheque can write their name as the payee and cash it at the bank.
What is an order cheque?
An order cheque is a type of payment method that can only be paid to the person or organization who is named on the cheque.
What is a post-dated cheque?
A post-dated cheque is a cheque that has a future date written on it. Such cheques are commonly employed for loan repayments, rent payments, and other types of contractual obligations.
What is an ante-dated cheque?
An ante-dated cheque is a cheque with a date that is earlier than the current date and is commonly used in India for financial transactions that have a timeline.
What is a self-cheque?
A self-cheque is a type of cheque that is issued by the account holder themselves, drawing from their own bank account and is used for withdrawing money or transferring funds without involving any third party.
What is a stale cheque?
A stale cheque is a check that is too old and cannot be honoured by the bank. In India, a cheque is considered stale when it is presented for payment after three months from the date it was issued.
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