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Cheque and Types of Cheque

Published on Wednesday, January 07, 2015
Cheque is, signed unconditional order addressing the bank to credit the amount to the holder of instrument .Cheque is widely used mode of payment. It is used as safe mode for making payments and loss can be minimized if lost It is an order to a bank by the drawer to pay the amount mentioned in the cheques to the presenter of the instrument.


Parties involved In a Cheque
Drawer:
A person that issue the cheque for making payment and person who deposit money to make payment is know as Drawer.

Drawee:
Drawee is the bank to whom a drawer gives order to make payment.

Payee:
Payee is the person who presents the cheque for payment .A person who deposited cheque to receive payment from bank is know as Payee.

For E.g A person Rohit want to give payment of Rs 5 lakh to another person name Nitin .He can issue the cheque on the name Nitin and give that cheque to Nitin .In this case Rohit is the drawer and Nitin is payee and where Rohit has account ,a bank which has issues the cheque book is know as drawee.

A cheques is said to be honored if Rohit has sufficient balance in his account in this case 5 lakh or more and if he does not have sufficient balance in his account that cheque is known as bounce cheque.

Types of Cheque:

1) Open cheque: Open cheque is payable in cash across the counter of bank who presented the cheque. In this cheque is not crossed with parallel lines on left hand side of cheque.

2) Crossed Cheque :In this a person who issue the cheque write account payee or put two parallel lines at the left corner of cheque .So it can not be cash over the counter .A person whose name is written on check has to deposit in his account and only credited to the bank account of the payee.

A person can write “Account Payee” between too parallel lines or not .

3) Order Cheque:In order cheque word Bearer strike off which make the cheque Order cheque . An order cheque can be paid to the named payee across the bank's account if so presented. A person has to present identification proof before enchasing the cheque over the counter .

4) Bearer Cheque : Bearer cheque is one that does not has the word "Bearer" on the cheque cancelled. This bearer cheque is payable to person who presented the cheque . This cheque is payable by the drawee bank over the counter to the Bearer or presenter of the cheque. A Bearer cheque can
be negotiated or pass to another person by mere delivery.

5) Post Dated Cheque :Date field is very important while issuing cheque .The date we enter in date field is not current date but any future date this is know as Post Dated Cheque. A person can present the cheque only at future date written on cheque.

6) Stale Cheque :Validity of cheque is for three months from the date on which person issue the cheque .If person not presented the cheque within three months to the issue branch the cheque is know as Stale Cheque. Earlier validity of cheque is for six months now it is reduced to three months

7) Travelers Cheque: Travelers cheque is used if person is going abroad . A best way of carrying foreign exchange overseas. Traveler's cheques are widely accepted globally as a mode of payment in many parts of the world. It is always worthwhile taking some of your foreign exchange in travelers' cheques as it is a great backup to cash and cards.

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