The Definition Of A Cheque

A cheque is a financial document that instructs a bank to transfer a specific amount of money from one person’s account to the account of another person or company in whose name the cheque was written or issued. The cheque is used to make safe, secure, and convenient payments. It is a safe option because no hard cash is involved in the transaction; thus, the risk of loss or theft is reduced. A cheque can be drawn on either a current or a savings account. A cheque number, MICR code, and IFSC code are printed on every bank check. The on-track motion of money through a written paper source is facilitated by the cheque method of fund payment, which involves three parties.

Types of a Cheque

• Bearer Cheque: The Bearer Cheque is a cheque where the carrier is approved to get the cheque encashed. This implies the individual who conveys the cheque to the bank has the position to ask the bank for encashment. This kind of cheque can be utilised for cash withdrawal. This sort of cheque is endorsable. No distinguishing proof is expected from the carrier of the cheque. For instance: A Cheque has been endorsed by Arjun (cabinet), and the payee for the Cheque is Varun. Varun can either go to the bank himself or send a third individual to get encashment for the cheque. No ID will be expected for the conveyor’s name.
• Order Cheque: This type of check cannot be endorsed, which means that only the payee whose name appears on the check is eligible to receive cash for the amount. To ensure that the cheque can be encashed to a payee, the drawer must strike the “OR BEARER” mark as indicated on the cheque.
• Crossed Cheque: This type of check does not allow for cash withdrawal. Only the amount from the drawer’s account to the payee’s account can be transferred. The cheque can be presented to the bank by any third party.
• Account Payee Cheque: It is the same as an account payee check, but it does not require the involvement of a third party. The funds will be directly transferred to the account number of the payee. Two lines are drawn on the left upper corner of the cheque, labelling it “A/C PAYEE” to ensure that this is an account payee cheque.
• Stale Cheque:Any cheque issued in India is only valid for three months from the issue date. As a result, if a payee goes to the bank to get a withdrawal for just a cheque signed three months ago, the cheque is considered stale.
• Cheque with an Expiration Date: An ante-dated cheque is one on which the drawer specifies a deadline before the latest date on the cheque.

Features of Cheque

• A check is an irrevocable order.
• It’s always derived from a specific bank.
• The signature on the exchequer is a requirement, and the maker should only do it.
• The sum is always a specific amount of money from one’s account.
• On-demand, a check is always payable.
• The payment of a check is always made in cash.
• The cash amount is now to be paid to the individual called in the document or the order’s bearer.

The Benefits of a Cheque

• It is a promissory note that can be endorsed in balance, favouring a third party, making it safer and easier to carry around than cash.
• If it is misplaced, it can be found easily.

The Constraints of a Cheque

• Because cheques are not legal tender, they may be refused.
• Cheques cannot be used by people who do not have a bank account.
• Depositing a check into your checking account necessitates a trip to the bank and takes time.

Conclusion

A cheque or check is a document that instructs a financial institution to charge a substantial sum of money from the person’s phone to the person named on the cheque. The money is held in a new bank account (also known as a cheque, current, chequing, checking, or share draught account) by the person who writes the cheque. The drawer fills out the cheque with the monetary amount, the date, and a payee, then signs it, instructing their bank, recognized as the drawee, to charge that person or business the amount stated.