A bearer cheque is a cheque where the payment is made to the one bearing or carrying it.
The name of the payee is never mentioned on such a cheque. However, a bank is entitled to pay the amount stated on a bearer cheque to whoever is carrying it. Many consider these types of cheques unsafe. If you lose such a cheque, the finder of the cheque can easily go and encash it because of the word 'bearer' written on it. The features of this cheque are similar to all other cheques which are drawn in favour of an individual or business. These include the date, amount as well as the signature of the person who holds an account in the back on which the cheque is drawn. There are many types of cheques, such as post-dated cheques, mutilated cheques, self cheques, traveller's cheques, banker's cheques, open cheques, order cheques, and crossed cheques. Each of these has its distinct characteristics. A bearer cheque is also popularly referred to as a 'carrier cheque'. The signature of the account holder is not required on the rear side of a bearer cheque.
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A bearer cheque is unique in its feature of not having a payee's name on it.
What is a Bearer Cheque?
A bearer cheque does not require any endorsement. The individual in possession of this type of financial instrument is able to obtain the funds from the bank without any difficulty. These types of cheques do not require the account holder's authorisation for making the payment. The process is very simple and easy. However, if a bearer cheque is lost, stolen or falls into the wrong hands, it can impact the issuer of the cheque, who stands to lose the amount stated on the cheque.
An order cheque is different from a bearer cheque. The words 'Or Bearer' are cancelled in this type of cheque. Instead, you have the words 'Or Order' written on an Order cheque. Unlike a bearer check, only the person whose name is written on the cheque can encash an order cheque. There are no transaction records maintained in the case of a Bearer cheque. Though no identification is required, if the amount stated on the cheque is of a large value and the bank has doubts, it has the right to ask for some identification. In such cases, Banks can demand the bearer of the cheque to sign on the rear side of the cheque. This is done by the banks as a safeguard measure.
How to Write a Bearer Cheque?
Most individuals assume that writing a bearer cheque is the easiest task in the world of finance. You have to be as careful in writing this cheque as you have to with other types of cheques. Let us understand the process of writing such a type of cheque. Given below are the various guidelines to write a bearer check.
- Always write the date on the cheque.
- The issuer or the person who writes the cheque must use the word 'Self' or 'Pay to the order of cash' in the space provided in the cheque.
- State the amount clearly in words as well as digits. When you are stating it in words, end the sentence with the word, 'only'. If the cheque falls into the wrong hands, the person can add some more amount without the 'only'. You stand to lose a lot in such a situation.
- When you key in the amount in digits, always use a backslash ( / )
- Sign the cheque in the space available. This is indicated by the words 'authorised signatory'. You have to sign above these words.
Bearer cheque sample
Who Can Withdraw the Bearer Cheque?
As mentioned above, anyone holding a bearer cheque can encash the amount stated on the cheque. In recent times, though, if the amount on a bearer cheque exceeds ₹ 50,000, a bank has the right to demand identification from the bearer of the cheque. Anyone who is in possession of bearer cash can encash it unless the bank feels a little suspicious and demands identity proof.
What Are the Withdrawal Rules on Bearer Cheque?
- A bearer cheque does not bear the name of the payee, which makes it a very risky affair, especially if it is lost. This type of cheque can be easily misused. Since the encashment of a bearer cheque is very easy, the Reserve Bank of India has laid down some very specific rules. The rules for withdrawing cash on a bearer check are given below:
- If a person with a bearer cheque of an amount of ₹ 50,000, the bank has to authenticate the identity of the person and ask for proof of address. The bank has every right to first check the details, and once verified, it can make the payment to the person.
- In case a bank finds something amiss, the bank can demand that the account holder, i.e. the issuer of the said cheque, visits the bank in person as well.
- A Know Your Customer (KYC) verification process becomes mandatory if the amount on a bearer check is more than ₹ 50,000
- If a bank suspects the bearer of the cheque who may consistently request immediate cash payment, the bank manager can intervene. The bank manager can contact the account holder and describe the situation. If the account holder sanctions authority, the bank manager asks the concerned bank personnel to clear the bearer cheque.
- A bank cannot deny the payment of the amount on a bearer cheque to the person who presents it. If required, the bank can ask the bearer of the cheque to sign on the rear side of the cheque.
Can You Encash a Bearer Cheque From Any Bank?
A bearer cheque can be encashed at any of the bank's branches. The bearer will not be denied the payment amount which is mentioned on the cheque. The branch which receives the bearer cheque forwards a scanned copy to the parent branch of the bank. Once the main branch confirms the same, the bearer of the cheque gets the payment.
Also Read: Guide to Writing a Cheque in The Right Way
Advantages of a Bearer Cheque
- A bearer cheque is one of the most simple and easy modes of receiving payment at a
bank branch of the account holder.
- Bearer checks do not require an endorsement.
- Individuals who possess such cheques do not have to be account holders at the branch at which they present the check.
- You can easily convert a bearer check into an Order check. All you have to do is to draw a horizontal line across the words 'on bearer'. These words are stated on the top and right sides of the cheque. It appears just below the date mentioned on the cheque.
This article informs you about the ease of receiving payments from a bearer cheque as well as the risk involved with such types of cheques. Individuals who issue such cheques should take care to issue them to trusted people only as they can be misused. In case the cheque gets lost and has not been encashed, the issuer of the cheque must inform the said bank at the earliest.
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