What is Cheque and its Types
A cheque is an order in writing drawn upon a bank to pay a specified sum to the bearer or the person named in it.It is bill of exchange draws on specific maker and expressed to se payable on demand.
Drawer is person who has an account in the bank and who drawes a cheque for making payment. Drawee is a person whom the cheque is drawan eg cheque is issued of XYZ bank than .XYZ is the drawee.
Payee is the person to whom the amount stated in the cheque is payable.
Important points for cheque payment :
- Do not use post dated cheque as they may cause problems if paid in before the date shown by being returned unpaid or being cleared before you are expecting it.
- draw a line through unused space on the cheque to avoid unauthorized people adding extra details.
- Record details of cheque issued on cheque book counterfeited and carefully check against bank statement so discrepancies can be picked up and reported to your bank or building society.
- Don’t accept a cheque or banker’s draft from someone unless you absolutely know and trust them.
- Remember that even after the value of the cheque has been credited to your account there is still a risk that the money could be reclaimed if the cheque turns out to be stolen or counterfoil.
- Be aware that bankers draft and building society cheques are not necessarily safe form of payment as the money may not be paid if they are found to be stolen.
Reason Behind Return of Cheque
- Fund insufficeint (no fund in the debit bank account for the cheque amount.
- Exceeds arrangement normally applicable to overdraft account the cheque amount exceeds overdraft limit for the debit account
- Drawer signature incomplete.
- Drawer signature illegible.
- Drawer signature differs.
- Payment stopped by drawer.
- instrument contains extraneous matter.
- image not clear present again with paper
- account closed
- no such account this happens when the account number is printed and the account number is printed and account number written by hand illegible.
- amount in protective crossing incorrect.
- amount in protective crossing required /illegible
- bank / Branch booked.
Type of Cheques :
Order cheque :
A cheque payable to particular person or his order is called as order 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.
Bearer cheque :
A cheque which is payable to person whosoever bears is called 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’.
Blank Cheque :
A cheque on which the drawer puts his signature and leaves all other columns blank is called a blank cheque.
Stale cheque : the cheque which is more than 6 month old is state as stale cheque.
Mutilated Cheque :
If a cheque is torn into two or mote pieces it is termed as multiple cheque.
Post dated cheque :
if a cheque is torn into two or more pieces it is termed as mutilated cheque.
Open cheque : A cheque which has not been crossed is called an open cheque .Even if a cheque is crossed and subsequently the drawer has cancelled the crossing at the request of the payee and affixes his full signature with the word crossing cancelled pay cash.it becomes an open cheque.
Crossed Cheque :
A cheque which carries too parallel transverse line across the face of the cheque with or without the word and co is said to be crossed .A crossed cheque has two parallel lines drawn on the face of the cheque.
And you may or may not add additional words like “& CO.” or “Account Payee” or “Not Negotiable”.
Such a cheque cannot be en-cashed at the cash counter of a bank. So it has to only be credited to the payee’s account.
Gift cheque : Gift cheques are used for offering presentation on occasion like birthday wedding and such other situations it is available in various denominations.
Travellers Cheque :It is an instrument issued by a bank for remittance of money form one place to another.
MICR Cheques /Draft :
What a view to speeding up the cheque clearing process both local as well as inter city cheques the reserve bank of india has introduced mechanized cheque processing system using MICR magnetic ink character recognition )technology initially in the four metropolitan cities of Bombay ,Calcutta madras and new Delhi.
Meaning of crossing in Cheque :
Crossing of cheque means drawing two parallel lines on the left hand top corner of cheque. Sometime it is done on center of cheque.
The negotiable instrument act 1881 recognises crossing of cheque .A crossing is direction to paying banker that the cheque should be paid only to the banker and if the banker is named in the crossing only to that baker.The holder of cheque allowed to cash it across the counter.
Types of crossing :
- General crossing
- Special Crossing general crossing
Where a cheque bearer a cross its face an additon of words and company or any abbreviation therof between two parallel transaction lines or of two parallel line of simply either with or without the words not negotiable the addition shall be deemed a crossing and the cheque shall be deemed to be crossed generally.