A cheque is a written document that instructs a bank to pay a specified sum of money from a person’s account to another person or company. It is a convenient and secure way to make payments without the need for cash.

What is a Cheque?

A cheque is a document that orders a bank to pay a certain amount of money from a person’s account to another person or company’s account. It is a convenient and secure way to make payments, as it eliminates the need for cash.

Features of a Cheque

All cheques have certain common features, including:

• The name of the bank that the cheque is drawn on
• The account number of the person or company who is writing the cheque
• The date the cheque is written
• The amount of money the cheque is for
• The name of the person or company the cheque is payable to
• The signature of the person who is writing the cheque

Legal Definition of a Cheque

According to the Negotiable Instruments Act, 1881, a cheque is defined as “a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.”

Cheques are a convenient and secure way to make payments. There are several different types of cheques, each with its own unique features and uses. By understanding the different types of cheques, you can choose the best option for your needs.

Types of Cheques

Cheques are financial instruments used to make payments. There are various types of cheques, each with its own characteristics and uses. Here are some common types of cheques:

1. Bearer or Open Cheque

• A bearer cheque is a cheque that is not crossed and can be encashed by anyone who presents it at the bank.
• The holder of a bearer cheque can receive payment over the counter at the bank, deposit the cheque in their own account, or pass it to someone else by signing the back of the cheque.

2. Order Cheque

• An order cheque is a cheque that is payable to a specific person or entity.
• The word “bearer” may be crossed out or canceled, and the word “order” may be written on the cheque.
• The payee of an order cheque can transfer the cheque to someone else by signing the back of the cheque.

3. Crossed Cheque

• A crossed cheque is a cheque that has two parallel lines drawn across its face.
• Crossed cheques cannot be encashed over the counter at the bank and must be deposited into a bank account.
• This helps to prevent theft or misuse of the cheque.

4. Account Payee Cheque

• An account payee cheque is a crossed cheque that has the words “account payee” written between the two parallel lines.
• This type of cheque can only be deposited into the bank account of the payee.

5. Post Dated Cheque

• A post dated cheque is a cheque that has a future date written on it.
• The cheque cannot be cashed until the date written on it.

6. Stale Cheque

• A stale cheque is a cheque that is more than six months old.
• Stale cheques cannot be cashed and must be reissued.

7. Ante Dated Cheque

• An ante dated cheque is a cheque that has a date earlier than the current date.
• Ante dated cheques are not recommended as they can cause confusion and may not be accepted by banks.

8. Truncated Cheque

• A truncated cheque is a cheque that has been electronically scanned and stored as an image.
• Truncated cheques are used for electronic payments and can be processed more quickly than paper cheques.

9. Traveler’s Cheque

• A traveler’s cheque is a pre-paid cheque that can be used to make payments while traveling.
• Traveler’s cheques are often used by people who are traveling abroad and do not want to carry large amounts of cash.

10. Mutilated Cheque

• A mutilated cheque is a cheque that has been damaged or torn.
• Mutilated cheques may not be accepted by banks and may need to be replaced.

11. Banker’s Cheque

• A banker’s cheque is a cheque that is issued by a bank and guaranteed by the bank’s funds.
• Banker’s cheques are often used for large payments or when a high level of security is required.

Traveler’s Cheques

• Traveler’s cheques are widely accepted worldwide, with over 4,00,000 locations across 200 countries.
• These cheques can be easily encashed or used at various establishments, including exchange bureaus, banks, shops, restaurants, and hotels.
• One of the key advantages of traveler’s cheques is their no-expiration feature. This allows the holder to cash in any leftover cheques or retain them for future travels.
• However, the use of traveler’s cheques has declined since the 1990s due to the rise of digital banking alternatives such as credit cards, debit cards, and automated teller machines (ATMs). These alternatives offer greater convenience and ease of use for travelers.

Features of a Cheque

Cheque transactions are considered highly secure, and various features distinguish different types of cheques within the Indian banking system:

• Cheques are always drawn on a banker where the drawer maintains an account.
• They are always payable on demand and do not require acceptance, although banks may mark cheques as “good for payment” as a customary practice.
• Unlike bills or promissory notes, cheques can be payable to the drawer themselves or made payable to the bearer on demand.
• The banker’s liability is solely to the drawer, and the holder has no recourse against the banker if a cheque is dishonored.
• In India, a cheque is typically valid for 3 months from its issuance date, except for postdated or antedated cheques.
• No stamp is required to be affixed on cheques.

Types of Crossing Cheques

Cheque crossing is a secure method used in banking to make cheque payments. It involves drawing two parallel lines across the face of the cheque, typically with the phrase “and Co.” or “Account Payee Only” written between the lines. This ensures that the cheque can only be deposited into the payee’s bank account, reducing the risk of fraud and unauthorized access to funds.

There are several types of cheque crossings, each serving a specific purpose:

1. General Crossing: This is the most common type of crossing. It is indicated by drawing two parallel lines across the cheque without any additional words or phrases. A general crossing allows the cheque to be deposited into any bank account.

2. Special Crossing: A special crossing is used when the cheque is intended for a specific bank. The name of the bank is written between the two parallel lines. This type of crossing restricts the cheque to be deposited only into the specified bank.

3. Not Negotiable Crossing: This type of crossing is used when the cheque should not be transferred or negotiated to a third party. The words “Not Negotiable” are written between the two parallel lines. This crossing ensures that the cheque can only be deposited into the payee’s bank account.

4. Account Payee Only Crossing: This crossing is similar to the “Not Negotiable” crossing, but it specifically states that the cheque can only be deposited into the payee’s bank account. The words “Account Payee Only” are written between the two parallel lines.

Cheque crossing enhances the security of cheque payments by reducing the risk of fraud and unauthorized access to funds. It ensures that the cheque can only be deposited into the intended recipient’s bank account, providing peace of mind to both the payer and the payee.

Cheque Crossing

Cheque crossing is a security measure used to ensure that a cheque can only be deposited into a bank account and cannot be withdrawn over the counter.

Penalty for Dishonour of Cheque

If a cheque is dishonored, the defaulter can be punished with a monetary penalty that may be twice the amount of the cheque or imprisonment for a term that may be extended to two years, or both. The bank also reserves the right to stop the checkbook facility and suspend the account for repeated offenses on bounced cheques.

Essentials of a Cheque

Before using a cheque for payments or withdrawals, it’s crucial for every bank account holder to understand the essential characteristics of a cheque. These essentials include:

• Unconditional Order: A cheque serves as an unconditional order, instructing the bank to pay a specific sum of money from the account holder’s bank account.

• Drawn on a Particular Bank: A cheque is always drawn or issued on a specific bank, which is referred to as the drawee bank.

• Payable in Cash: Cheques are always payable in cash, meaning the recipient can present the cheque at the bank and receive the specified amount in cash.

• Payable on Demand: Cheques are payable on demand, which means the bank must honor the payment request immediately upon presentation of the cheque.

• Specified Sum of Money: The amount specified on the cheque represents a particular sum of money that is to be drawn from the account holder’s bank account.

• Payable to a Specific Person: The amount mentioned on the cheque is to be paid to the person named on the cheque, or to the bearer (if it’s a bearer cheque), or to the order of a specific person or entity.

• Signature Requirement: The cheque must be signed by the drawer, who is the person authorizing the payment.

There are various types of cheques, each with its own unique features and purposes. These include bearer cheques, order cheques, crossed cheques, account payee cheques, post-dated cheques, stale cheques, and more. Understanding the different types of cheques is essential for effective financial management and banking transactions.

Types of Cheque FAQs

What is a cheque?

A cheque is a written document that instructs a bank to pay a specified sum of money from the account holder’s bank account to the person or entity named on the cheque.

Who are the parties to a cheque?

The parties involved in a cheque transaction include the drawer (the person who writes the cheque), the drawee (the bank on which the cheque is drawn), the payee (the person or entity to whom the cheque is payable), the holder (the person who currently possesses the cheque), the endorser (the person who signs the back of the cheque to transfer ownership), and the endorsee (the person to whom the cheque is transferred).

On whom is a cheque drawn?

A cheque is drawn on the bank where the account holder has an account. The bank is referred to as the drawee bank.

What are the different types of cheques?

There are various types of cheques, including bearer cheques, order cheques, crossed cheques, account payee cheques, post-dated cheques, ante-dated cheques, traveler’s cheques, and more. Each type of cheque has its own specific characteristics and purposes.