Cheques Used in India: A cheque is a written order issued by an account holder to the bank directing it to pay that sum of money to a third party or yourself. It is one of the simplest and easiest ways to make money transfers. Hence to put it simply the cheque is a promissory note, and hence it is a promise made by the drawer to pay a certain amount to the holder of the cheque
Cheques have a long history and were first used in China. After that merchants used them widely during the Middle Ages. Banks started issuing cheques in 1659 in England. The cheques were made of wood at that time and were very heavy. At present plastic cheques are common.
In the modern world, cash or debit cards are the main media of payment. But there is still a place for cheques in our lives: they are required to make large payments, take loans and buy cars and property. This document is one of the most important parts of the banking system and it can help you understand many other things like a credit and debit note, so you should have an understanding of the different types of cheques. Hence we have made a detailed guide for it. So, the most common types of cheques in India include:
This type of cheque is issued to a payee and is payable to the bearer on demand. They don’t list out payees however, they have “or bearer” printed ahead of the name of the person who is supposed to be paid(the payee). This makes them transferable by anyone who holds them
A bearer cheque can be endorsed (signature and writing) by the person who is carrying it to the bank. This authority will be used as proof that he is entitled to withdraw money from the account of the drawer. It can also be endorsed (signature only) by the payee. This type of endorsement is known as a blank endorsement
An open cheque is not crossed and can be cashed at any bank. The payee can deposit an open cheque in his account or cash it at a branch of his bank. Open cheques are free from all restrictions and are risky because they are easier to lose or get stolen. The depositor must ensure that they do not issue an open cheque by mistake. This kind of risk can be avoided by using a crossed-cheque instead of an open cheque for paying bills and utility expenses.
A post-dated cheque bears a date in the future and cannot be deposited before that day. It is often given as part of a financial transaction, such as rent or tax payment. In most cases, banks will not allow you to deposit a post-dated cheque before its date or cash a post-dated cheque early; however, some financial institutions may offer you an advance for your post-dated cheques if you provide them with proof that the other party has issued you a post-dated cheque. Generally speaking, it is illegal to write and issue a post-dated cheque with the intent to defraud or commit another crime
These are used as evidence that you have money in a particular bank account. A person cancels a cheque by crossing the line through it and writing “cancelled” with the date on the face of the cheque. The cancelled cheque should also have the signature of the person cancelling it. Click here for more info.