You must have seen such a scene in a movie where a billionaire signed a blank cheque and asked others to put an amount there. Sounds interesting, right? Cheques have always been a sign of wealth. Apart from that, cheques are important instruments as well with various financial uses. It helps us to transact money seamlessly.
Do you know that there are different types of cheques available in the market? Every cheque is used for different purposes. You also need to know all the protocols to write a cheque. If you do not know all the instructions relating to the protocols of cheques, consider reading the article.
Did you know?
There’s such a thing as a left-handed chequebook.
History Of Cheques
There were so many proofs of cheques in ancient times. The necessity of cheques comes when people want to eliminate the burden of cash or gold. In the ancient period, people used cheques as a bill of credit, i.e., people used the cheque to transfer money to a third person.
In India, during the Mauryan empire, Adesha was used as the official bill of credit. Not only in this era, but Romans also used cheques as prescriptions. In the 13th century, cheques were used to pay for commercial trade. In Venice, they use it as the bill of credit, and the cheques were used as the order to pay the amount to the third party. To reduce the load of heavy coins and gold, cheques seemed very handy to people.
Starting with the letter as a cheque, it also evolved timely. In 1863, the Bank of England started in the form of 50,100 and 200 cheques, and over time it was changed to the form of paper. In the modern era, some banks have enabled the picture clicking facilities of the cheques to make the process very easy.
Also Read: Meaning and Need for a Cancelled Cheque
What Are the Component of the Cheques
The cheques come in the form of rectangular pieces of paper. In this paper, there is information given. Some terms you must know before using the cheques.
Drawer: The drawer is the person who is sending the money. On the cheque, the drawer's name is printed. There will be space for the signature.
Payee: The payee is the person who will get the money. Only after the signature of the drawer the payee will get the money.
Drawee: Drawee is the bank of the drawer. The drawer orders the bank to send the money to the payee through the cheque. After getting the cheque, the payee submits it to the bank, and the banker might cross-check if all the information is correct.
Amount: The amount should be written properly in the particular box.
Different Types of Bank Cheques
In the market, you can see different types of cheques based on their purposes. In this section, we will talk about twelve different types of cheques.
Order cheques are issued to send the money to the payee. In these cheques, whose name is written as payee will get the money. Before giving the money, banks do some interrogation. They check whether all the information matches or not before releasing the payment.
As the name suggests, the one who bears the cheque to the bank will get the money. To identify the bearer cheques, you need to search for a word called 'or bearer', which will be cancelled. You can carry the cheque to the bank, and the amount will be given to you without any investigation.
Open cheques are uncrossed cheques. It does not have a cross line. You can encash it from any bank. The payee needs to carry it to the bank. In some other cases, the payee can transfer the cash to another payee, and he can also get the cash from the bank. Here the signature of the drawer needs to be present on both sides of the cheque.
A crossed cheque is the kind of cheque where the issuer makes two parallel lines at the left side corner. In between the lines, 'a/c payee' is written. These cheques are safer as only the payee will get the payment from the bank.
Post Dated Cheque
Such types of cheque are cashed after the issued date. In simple words, if you go to the bank to encash your money before the issued date, the bank will not provide you with the money. You will get the money only after the issued date.
If the drawer or the issuer makes the signature in a particular place and keeps the amount blank for the payee to fill, then it is called a blank cheque. Such cheques are riskier. If any dishonest person gets the cheque, he can misuse it.
Gift cheques are given for gifting purposes. The existence of such cheques makes the transaction easy. It can be given at weddings, birthdays, festivals, etc.
A banker's cheque is another type of cheque issued on behalf of a customer. The bank issues such cheques to make remittances. In this case, the specified cash is debited from the customer's account, and then the bank issues the cheques. It comes under a non-negotiable instrument.
A stale cheque is the opposite of post dated cheques. As the post-dated cheque needs to go after the issued date, the stale cheque is beyond the date. In simple words, those cheques have crossed 3 months beyond the issued date. If the payee does not encash the money, it will be considered a stale cheque.
Traveler cheques are helpful for those who travel a lot to foreign countries. In such cheques, the payee can get the cash from another bank, and the payment is made in the other countries currency. Such cheques do not have any expiry dates. This is very helpful for those who do not love to carry cash.
From the name, you can probably understand that such types of cheques are for self-use only. This kind of check is used for self. In the drawee column, you need to write your name. Such cheques can be encashed only from your branch. You can not get money from the other branches.
The last type of cheque is a mutilated cheque. If the cheque is torn into two parts, it is called the mutilated cheque. In another way, if the cheque is old by six months, that is also considered a mutilated cheque. In such cases, the banker will not make the payment without the permission of the drawer.
How to Write a Cheque?
Writing the cheque properly is very crucial. Otherwise, it might lose its authenticity. If you don't know how to write a cheque, do not worry. You need to follow these simple steps.
Firstly you need to open your cheque book and find a blank cheque. In the top corner, you will find the boxes for the date. You need to fill the box correctly. Avoid any kind of mistakes.
The next step will be to write the name of the payee. When filling in any information, make sure you are attentive to every detail.
After writing the name of the payee, you need to write the amount. First, write the amount in number within the box and then in words. Make sure you write it properly, as one extra zero can make the cheque redundant.
The last step is the signature. Before signing, you need to check all the information. Check if you have put the date or the amount correctly. Now you can sign the cheque, and you are done.
Some Mistakes You Should Avoid
- Omit the word 'or bearer' if it is not needed.
- Avoid spaces when you write the amount.
- You need to end the amount with 'only' when writing them in words.
- The MICR band is a very crucial part. Do not sign over to it.
- The date is important so when you are writing the dates, make sure you are aware of it.
- You need to keep actual records of your cheques.
Cheques are one of the most important negotiable financial tools. One can go cashless with a simple cheque. With modern technology, it is made with a MICR band to avoid fraudulent activity. There are different types of bank cheques. Bearer and order cheques are the most common among them. In this article, we have discussed all of them.
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