The cheque can be divided into following kinds according to its importance and functions.

MAIN TYPES

1. Bearer Cheque:

It is a cheque, which involves no restriction and any person can withdraw money from the bank without giving his identification.

[CHARACTERISTICS]

• Any person can withdraw money from the bank without giving his identification.
• In this cheque, the word “bearer” is written after the name of payee.
• This cheque can be converted into order cheque with the consent of holder.
• The right to receive the amount of this cheque can be transferred without any endorsement.
• The presenter or holder of this cheque can withdraw the amount.

2. Order Cheque:

For the payment of this cheque, the bank demands identification horn the payee to certify the name written on the cheque. No any other person except payee can withdraw money from the bank.

[CHARACTERISTICS]

• The word “Order” is written after the name of payee on this cheque and the word bearer is written off.
• The amount of this cheque is not paid without identification.
• This cheque can be converted into bearer cheque. In this regard, the drawer of cheque is the sole authority.
• This cheque is safer as compared to bearer cheque.
• The right to receive the amount of this cheque cannot be transferred without endorsement.

Only that person can withdraw the amount whose name is written on the cheque.

3. Crossed Cheque:

It is a typical cheque on which the drawer draws two transverse parallel lines. These lines stand for some instructions. These cheques are much safer as compared to the order or bearer cheques. The amount of this cheque cannot be collected at bank’s counter because the amount of this cheque can only be deposited in the A/c of a particular person.

[CHARACTERISTICS]

• Two transverse parallel lines are drawn on the face of cheque.
• This cheque is not paid in terms of money. Firstly, the amount ol this cheque is transferred to the A/c of payee and for the withdrawal of money; the payee has to draw a new cheque.
• The crossing of crossed cheque can be cancelled and only the drawer of this cheque has the authority to do so.
• This cheque is considered much safer as compared to Bearer or Order cheque.

This cheque also requires endorsement for the transfer of rights.

OTHER TYPES

4. Lost Cheque:

If the true account holder losts its cheque and reports to the bank then the cheque will be considered as lost cheque.

5. Fraudulent/Forged Cheque:

If a person who has no A/c in the bank issues a cheque or the cheque is issued on a closed A/c, then the cheque will be considered, as forged cheque and the bank will not accept it.

6. Post Dated Cheque:

It is a cheque, which bears a date later than the date of issue. Infact it is considered as B/E.

7. Out Dated I Stale Cheque:

After the expiry of 6 months from the date of issue, the cheque will be considered as out dated cheque.

8. Traveller’sCheque:

The people who travel from one place to another or from one country to another use this cheque. These cheques are issued by the banks on which a specified amount is written. The holder of this cheque can withdraw money from any branch of specified bank up to the amount written on the cheque.

9. Blank Cheque:

The cheque on which there is no description of any date or amount. It means the drawer of the cheque only signs the cheque. These cheques are issued only to those persons who are dependable.

10. Open Cheque:

The cheque, which is not crossed, is called open cheque.. It may be bearer or order.

11. Marked Cheque:

If there is a spot of ink or colour on the cheque then the cheque will be considered as marked cheque. If the marks on cheque are light in nature then the bank will make the payment

12. DishonouredCheque:

If the bank does not accept any cheque for payment then it is considered as dishonouredcheque.

13. HonouredCheque:

The cheque accepted by the bank for payment is called honouredcheque.

14. Mutilated Cheque:

If a cheque is tom into pieces or seems to have been tom will not be acceptable. However, it can be paid after getting confirmation in writing from drawer.

15. Washed Cheque:

If the description of amount, date or signature is not clear on cheque due to wash then it is called washed cheque.

16. Plain Cheque:

It is a cheque on which no particular/information is written or given.

17. Local Cheque:

A cheque will be considered as local if the drawer, drawee and the payee belong to a same country. It also has two kinds.

• Cheque:

It is a cheque used to settle the transactions of the governments of same country.

• Private Cheque:

The cheque issued or received for the private transactions of individuals or institutions of same country.

18. Foreign Cheque:

It is a cheque issued against the transaction of two different countries for the receipt and payment.

It has following two kinds:

19. Cheque:

The cheque issued and received for government transactions.

20. Private Cheque:

The cheque issued and received for private transactions of individuals or institutions.

 

Types of Cheque: Understanding the Different Forms of Payment

Introduction

Cheques have long been a popular method of payment, offering a convenient and secure way to transfer funds. However, not all cheques are created equal. In fact, there are several different types of cheques, each with its unique features and functions. In this article, we will explore the various types of cheques and their uses, providing you with a comprehensive understanding of this essential financial instrument.

What is a Cheque?

Before diving into the different types of cheques, let’s start with the basics. A cheque is a written document that orders a bank to pay a specific amount of money from the account of the person or organization issuing it. It serves as a legal instrument, similar to a promissory note, ensuring that the recipient receives the specified sum.

The Different Types of Cheques

1. Bearer Cheque

A bearer cheque is a type of cheque in which the payment is made to the person who possesses the cheque, also known as the “bearer.” This means that anyone who physically holds the cheque can cash or deposit it. Bearer cheques are generally riskier than other types since they can be easily stolen or lost. Therefore, it is crucial to exercise caution when using bearer cheques and ensure their safekeeping.

2. Order Cheque

Unlike a bearer cheque, an order cheque is payable only to the person named on the cheque or their assigned representative. This type of cheque adds an extra layer of security, as it requires the endorsement of the payee. The payee must sign the back of the cheque to authorize the transfer of funds to another party, making order cheques more traceable and secure.

3. Crossed Cheque

A crossed cheque is distinguished by two diagonal lines drawn across its face, indicating that the cheque cannot be cashed over the counter. Instead, the funds must be deposited directly into the payee’s bank account. The crossing of the cheque enhances its security, reducing the risk of fraud or unauthorized use. It also ensures that the funds are traceable, providing a reliable audit trail.

4. Open Cheque

An open cheque, also known as an uncrossed or bearer cheque, is a cheque that does not have any crossing lines or restrictions. The payee can either cash the cheque or deposit it directly into their bank account. Since open cheques can be easily misused or stolen, it is crucial to exercise caution when issuing or accepting them and only do so when necessary.

5. Post-Dated Cheque

A post-dated cheque is a cheque with a future date written on it by the drawer. This type of cheque is often used for future-dated payments, such as rent or installment payments. By post-dating the cheque, the drawer ensures that the funds will only be accessible on or after the specified date. While post-dated cheques offer convenience in terms of scheduling payments, it is essential to communicate the arrangement clearly with the payee to avoid any confusion.

6. Self Cheque

A self cheque is a cheque issued by an account holder to themselves. This type of cheque allows the account holder to withdraw or transfer funds from their own account to their own name. Self cheques are commonly used when the account holder wants to make a withdrawal in cash or transfer funds to another account under their name.

7. Traveller’s Cheque

Traveller’s cheques are a form of prepaid cheques designed for the convenience and safety of travelers. They are pre-printed and available in fixed denominations, typically in a foreign currency. Traveller’s cheques are widely accepted and can be easily replaced if lost or stolen. They provide a secure method of carrying funds while traveling, eliminating the need to carry large sums of cash.

In Conclusion

As we’ve explored, cheques come in various forms, each serving specific purposes and offering different levels of security. Understanding the different types of cheques is essential for both issuers and recipients to ensure smooth and secure transactions. Whether it’s a bearer cheque, order cheque, crossed cheque, or any other type, each has its role in facilitating financial transactions. By familiarizing yourself with these cheque types, you can confidently navigate the world of payments and make informed choices regarding your financial transactions.