What are the different types of cheques
Cheque is an
important document that an individual, companies, governments and many
others use to transact their business. By definition, cheque can be
termed as a negotiable document to transfer money either in physical
form or to effect inter account transfer.
Unless
or otherwise stated, a cheque is a signed unconditional order
addressing the bank to credit it by the issuer. The issuer of the cheque
will have an account with the bank to which it is connected. The
account can be either savings type or a current account. A cheque
transaction is one of the safest ways of conducting the business because
it leaves an entry against the cheque honoured by the bank in the
banking transactions conducted by you which can be traced back in case
of necessity. There are various types of cheques and various ways of issuing a cheque.
Different types of cheques based on methods of issuing
Open cheque or bearer cheque:
The issuer of the cheque would just fill the name of the person to whom
the cheque is issued, writes the amount and attaches his signature and
nothing else. This type of issuing a cheque is also called bearer type
cheque also known as open cheque or uncrossed cheque. The cheque is
negotiable from the date of issue to three months. The issued cheque
turns stale after the completion of three months. It has to be
revalidated before presenting to the bank.
A crossed cheque or an account payee cheque: It
is written in the same as that of bearer cheque but issuer specifically
specifies it as account payee on the left hand top corner or simply
crosses it twice with two parallel lines on the right hand top corner.
The bearer of the cheque presenting it to the bank should have an
account in the branch to which the written sum is deposited. It is
safest type of cheques.
A self cheque: A self
cheque is written by the account holder as pay self to receive the money
in the physical form from the branch where he holds his account.
Pay yourself cheque: The
account holder issues this type of crossed cheque to the bank asking
the bank deduct money from his account into bank’s own account for the
purpose buying banking products like drafts, pay orders, fixed deposit
receipts or for depositing money into other accounts held by him like
recurring deposits and loan accounts.
Post dated cheque (PDC): A
PDC is a form of a crossed or account payee bearer cheque but post
dated to meet the said financial obligation at a future date.
Various types of cheques based on their functionality
Local Cheque: A local
cheque is a type of cheque which is valid in the given city and a given
branch in which the issuer has an account and to which it is connected.
The producer of the cheque in whose name it is issued can directly go to
the designated bank and receive the money in the physical form. If a
given city’s local cheque is presented elsewhere shall attract some
fixed banking charges. Although these type of cheques are still
prevalent, especially with nationalised banks, it is slowly slated to be
removed with at par cheque type.
At par cheque: With the
computerisation and networking of bank branches with its headquarters, a
variation to the local cheque has become common place in the name of at
par cheque. At par cheque is a cheque which is accepted at par at all
its branches across the country. Unlike local cheque it can be present
across the country without attracting additional banking charges.
Banker’s cheque: It is a
kind of cheque issued by the bank itself connected to its own funds. It
is a kind of assurance given by the issuer to the client to alley your
fears. The personal account connected cheques may bounce for want of
funds in his account. To avoid such hurdles, sometimes, the receiver
seeks banker’s cheque.
Travelers’ cheques: They
are a kind of an open type bearer cheque issued by the bank which can
be used by the user for withdrawal of money while touring. It is
equivalent to carrying cash but in a safe form without fear of losing
it.
Gift cheque: This is another banking instrument introduced for gifting money to the loved ones instead of hard cash.
Cheques per se have been around since
the inception of banking system. The cheque transactions are one of the
safest ways of conducting business. Although cheque is going to be still
the mainstay of banking transactions, it leaves a good amount of paper
usage. With net banking becoming popular and made secure, more and more
people are looking forward to transacting their business using net
banking. ATMs are slowly replacing the self cheques for withdrawal of
money. Post dated cheques are getting replaced by periodic electronic
clearing instructions.
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