Types of Cheques

September 8, 2011

Banking

Cheque is playing the important role on money transactions for individual and company. It become the basic standard for any banking transactions. When it comes to the awareness on writing the cheque is not encouraging. I could see the people asking for the help to write cheque. This article explores the basic ideas on writing the cheque and explains the different types of cheques. If you have any thoughts, please post it in the comments section. Subscribe to our future articles here.

Open Cheque

Open cheque means, a person who holds the cheque can receive the money at the counter. The open cheque can be either bearer or order cheque.

  • Bearer Cheque

Bearer cheque means who ever holds the cheque can be taken money over the counter in the bank. There is no restriction like the name specified in the cheque leaf. To make it as bearer cheque, you must not strike the ‘bearer’ word in the cheque leaf after the ‘Payee’ name sentence. This kind of cheque is very risky because if some one stolen your cheque or you have lost the cheque, who holds the cheque can take the money from bank. If you want the bank to make money only to the person specified in the cheque leaf, please strike out the word bearer in the cheque leaf. The bearer cheque don’t need any endorsement. But, it is bankers liability to check if they are paying to the right person.

  • Order Cheque

An order cheque on the hand is a cheque made payable to a certain person or order. The language of such a cheque runs thus ‘Pay to Mr. X or order Rupees five hundred only’. An order cheque can be transferred only by endorsement and delivery. It must first be endorsed and the bank must take care to ascertain that the person demanding payment is the right person and that the addition of the word ‘bearer’ or ‘order’ thereto it is regarded as an order cheque.

Crossed Cheque

To prevent the cheque to be misused in the wrong hands, it will be crossed. It means that it has special meanings to the banker who pay the money based on the instructions given inside that cross mark. Crossing of a cheque means “Drawing Two Parallel Lines” across the face of the cheque. Normally crossed cheques can not en-cash in the counter. The holder of the cheque must have account in the bank to deposit that cheque.

  • Account Payee Only

If you write the words “account payee only” in between the lines, the bank is liable to pay the money only to that person specified in the cheque. It can not be paid to any other person. The person whose name is specified in the cheque, must have the bank account to en-cash the cheque. If he don’t have any account, he must create new account and deposit the cheque.

  • Not Negotiable

If the cheque has the words “not negotiable” between the lines, it means that the cheque can not be cashed by any other person then the name specified in the bank. Normally cheques can be transferred to third party by writing the details of the another person in the endorsement column. It indicates that the owner of the cheque directs the bank to pay to another person whose name is specified in the cheque. But, it can not be transferred if the cheque is mentioned as “not negotiable“.

Summary

I hope this article would have been more useful for the readers who are yet to understand the terms used in the cheque. It is very important to know the basic things on the financial life to avoid any loss of hard earned money. After reading this article, if you get any cheque please read it carefully to understand everything written in the cheque. If you have any doubts, please post it in the comments section.

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3 Responses to “Types of Cheques”

  1. vishvesh Says:

    You could have added pictures of the different categories of the Cheques.

    Reply

  2. Satish Says:

    Need More Clarity on this…
    “Normally cheques can be transferred to third party by writing the details of the another person in the endorsement column. It indicates that the owner of the cheque directs the bank to pay to another person whose name is specified in the cheque. But, it can not be transferred if the cheque is mentioned as “not negotiable“.”.

    How can the Owner of the cheque whose name is on the Check can endorse it to another person…who’s name is not mentioned in the Cheque????

    Reply

  3. Aayush Says:

    definition of not negotiable cheque is not clear.

    Reply

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