Cheque is one of the most common banking instruments used to withdraw money from the bank. It can be used to pay an individual, cash out, or deposit some amount of money to another account. Although it’s usage has declined in the last few years because of electronic transactions, it is still in used. So, it is important to know the different typed of cheques issued by the bank and difference between these cheques. Banks issue various types of cheques such as account payee cheques, bearer’s cheques, post-dated cheques, self cheques, etc.
Account Payee cheque
An account payee cheque, is a type of cheque that is marked with the words “account payee” or “a/c payee” between two parallel lines on the top left corner of the cheque leaf. The mark signifies that the payment should be made only to the account of the payee mentioned on the cheque and not to be paid in cash. The purpose of an account payee cheque is to ensure that the payment is securely credited to the intended recipient’s bank account and to prevent the cheque from being negotiated by someone other than the payee.
When you present an account payee cheque for deposit or clearing, the bank will verify the account details mentioned on the cheque and credit the amount to the specified payee’s account. This type of cheque provides an additional layer of security and reduces the risk of fraud or misappropriation of funds. It is commonly used in business transactions, salary payments.
A self cheque is written by an account holder to themselves. It can be used for various purposes, such as withdrawing cash from one’s own account or transferring funds from one account to another. While filling out a self cheque, the word “self” should be written on the space provided for the payee.
A bearer cheque is payable to the person who presents it to the bank, i.e., the bearer. It is a negotiable instrument and can be transferred by mere delivery. Bearer cheques can be risky because if lost or stolen, anyone who possesses it can cash it.
An order cheque is payable to a specific person or entity, as indicated by the account holder. The payee’s name is mentioned on the face of the cheque, and only that person or entity can receive the payment. It is generally a safer form of cheque since it requires identification and endorsement by the payee.
An open cheque is not crossed or marked in any particular way. It can be encashed at the counter of the bank by the bearer or the person whose name is mentioned as the payee. It is relatively less secure than crossed cheques.
Post-Dated Cheque (PDC)
A post-dated cheque is one that bears a future date rather than the current date. The cheque cannot be encashed until the specified date arrives. It is commonly used in situations where the payer wants to guarantee payment at a later date, such as for instalment payments or scheduled bill payments.
A stale cheque is a cheque that is presented for payment after a certain period from the date mentioned on the cheque. It used to be a six month period but, according to recent RBI guidelines, it has reduced to 3 months that is 90 days. Banks typically do not honour stale cheques. In case of a stale cheque, the recipient needs to ask the drawer for a fresh cheque.
Traveller’s cheques are preprinted, fixed-amount cheques that are widely accepted by businesses worldwide. They provide a safe and convenient way to carry money during travel, as they can be replaced if lost or stolen. The cheque holder must sign the cheque in the presence of the recipient for it to be valid.
Difference between stale cheques and post-dated cheques
The differentiating feature of stale cheque and a post-dated cheque from other cheques is the date. Both the cheques are invalid at the moment. However, these two are not the same. A cheque becomes a stale cheque when it is not encashed within 3 months that is 90 days from the date of issuing whereas a post dated cheque has a future date. A post-dated cheque is invalid until the date mentioned on the cheque leaf.
Difference between an account payee cheque and other types of cheques
All the other types of cheques can be encashed but an account payee cheque can be encashed. It is considered to be a safer type of cheque as the intended amount is transferred directly to the recipient’s account. This type of cheque provides an additional layer of security and reduces the risk of fraud or misappropriation of funds.
Difference between a self cheque and other types of cheques
A self cheque is used to pay oneself whereas other forms of cheques are used to cash out or pay another account. While filling out a self cheque, the payee section should be filled as “self”. Self cheques do not require endorsement since the account holder is both the drawer and payee. On the other hand, other types of cheques, such as order cheques, require endorsement by the payee before they can be cashed or deposited.
How to fill out cheques
Filling out a cheque correctly is important to ensure that it is processed accurately and the payment reaches the intended recipient. Here’s a step-by-step guide on how to fill out a cheque:
- First write date in the top right corner of the cheque. This is the date when the cheque is being filled out. The format should be DD/MM/YYYY. In case of a post dated cheque, you should write a future date when you want to pay the payee.
- Payee: On the line that says “Pay to the order of,” write the name of the person or business you are paying. Be sure to write the full and accurate name of the payee. In case of an account payee cheque, you can write “Account Payee” between two parallel lines at the top left corner of the cheque leaf. In case of a self cheque, you should write “self” on the payee section.
- Write the amount you are paying in words as well as numerical figures. After writing the amount in words, add the word “only”. Do not leave any space between the digits.
- Signature: At the bottom right corner of the cheque, sign your name as it appears on your bank account. The signature should match the one your bank has on record. This step is crucial as it authorises the payment.