What is Cheque & Different Types of Cheque

A cheque is a powerful financial tool that directs a bank to pay a specified sum of money to the person named on it. Known as a negotiable instrument, it ensures a reliable method of transferring funds. Here's an in-depth look at the different types of cheques used in India and their unique characteristics.

A cheque serves as a written order from the drawer (the person issuing the cheque) to their bank to pay a specified amount to the drawee (the person named on the cheque). This process facilitates secure and systematic monetary transactions.

Different Types of Cheques

Cheques come in various forms, each serving a different purpose and providing unique features. Here’s a breakdown of the common types of cheques you might encounter:

1. Bearer Cheque
   
   Definition: A bearer cheque is payable to the person who presents it at the bank. It’s easily transferable since ownership changes simply by delivering the cheque.
   
   Identification: Look for the words “or bearer” on the cheque. The bank will honour the payment to whoever carries the cheque.
   
   

2. Order Cheque
   
   Definition: Unlike bearer cheques, order cheques are payable only to the person whose name is specified on the cheque. The bank verifies the identity of the payee before processing the payment.
   
   Identification: The phrase “or bearer” is crossed out, indicating that only the named payee can receive the funds.
   
   

3. Crossed Cheque
   
   Definition: A crossed cheque has two parallel lines drawn across it, with “a/c payee” written inside. This type of cheque ensures that payment is made only to the account holder named on the cheque and can only be cashed or deposited into the payee’s account.
   
   Identification: The cheque features two sloping parallel lines and the words “a/c payee.”
   
   

4. Open Cheque
   
   Definition: An open cheque is not crossed and can be encashed by the bearer at any bank. It’s transferable, meaning the payee can transfer it to another person.
   
   Identification: It’s simply signed by the issuer and does not have the “a/c payee” crossing.
   
   

5. Post-Dated Cheque
   
   Definition: This type of cheque is dated for a future date. Banks will only process the payment on or after the specified date.
   
   Identification: The date on the cheque is set in the future, and it remains valid beyond this date.
   
   

6. Stale Cheque
   
   Definition: A stale cheque is one that is presented for payment after three months from the date of issuance. It is no longer valid for payment.
   
   Identification: Any cheque that has exceeded the three-month validity period.
   
   

7. Traveller’s Cheque
   
   Definition: Used primarily by travelers, this cheque can be encashed at banks worldwide. It provides a secure way to carry and exchange money while traveling.
   
   Identification: Issued by banks, it does not expire and can be used across different countries.
   
   

8. Self Cheque
   
   Definition: A self cheque is drawn by the issuer to withdraw money from their own account. It’s payable only at the bank where the account is held.
   
   Identification: The word “self” is written in the drawee column, indicating that the cheque is meant for the issuer’s own use.
   
   

9. Banker’s Cheque
   
   Definition: Issued by a bank on behalf of an account holder, a banker’s cheque is used for making payments to another person within the same city. It is considered a secure and non-negotiable instrument.
   
   Identification: Issued by the bank with the specified amount debited from the account holder’s account. Valid for three months and can be revalidated under certain conditions.