What is Cheque: Different Types of Bank Cheques

• A cheque is a written instruction, authorising a bank to execute a financial transaction.
• The person/entity who issues the cheque is the ‘Drawer’, while the person/entity in whose favour the cheque is issued is called the ‘Drawee’.
• Different types of cheques meet different financial requirements. Thus, identify the purpose of your transaction and then issue the relevant type of cheque.
• Different types of cheques include bearer, crossed, order, open, post-dated, bankers, travellers, self-cheque, and stale cheque.

A cheque is a financial instrument for executing various personal and professional transactions. From paying utility bills to settling vendors’ bills, there are a host of payments that you can seamlessly settle. Moreover, you can also use a cheque to withdraw cash and transfer funds between your accounts.Given such multiple uses of a cheque, it is important to understand the different types of cheques. This blog will educate about the different types and their application. It will also help you understand which type of cheque is suitable for which transaction.

Before understanding the different types of cheques, let’s understand what is cheque.A cheque is a financial instrument that facilitates cash withdrawals and fund transfers between bank accounts. It is a written instruction, authorising a bank to execute a financial transaction. The person/entity who issues the cheque is the ‘Drawer’. On the other hand, the person/entity in whose favour the cheque is issued is called the ‘Drawee’.The drawee presents the cheque to the bank on the specified date to receive the amount mentioned on the cheque.

Understanding the different types of cheques helps issue the most suitable cheque type that best suits your needs. It also helps you manage your finances better.Here are the types of cheques for your knowledge:

• Bearer Cheque: The bank pays it to the person bearing i.e. holding the cheque, making it a convenient mode of quick encashment.
• Crossed Cheque: Bearing two parallel lines on the top left corner, it ensures only the designed payee receives the amount in his account.
• Order Cheque: It is payable only to the person mentioned against the ‘Pay’ or ‘Pay to the Order’ field, after identity verification.
• Open Cheque: It is not crossed, and the payee can encash it at the bank. Moreover, it is also transferable by the payee.
• Post-Dated Cheque (PDC): You can issue it for a payment falling due on a future date. The bank honours the payment on the date you mentioned. A PDC is useful for rental payments, EMIS, etc.
• Ante Dated Cheque: These cheques are written by the cheque drawer and are usually backdated.
• Banker’s Cheque: It is issued on your behalf by the bank itself. It is normally useful for transactions requiring payment certainty. The bank debits your account with the relevant amount and issues the cheque.
• Traveller’s Cheque: To reduce the hassles of carrying cash for travel, ask your bank about it. You can conveniently encash currency from the bank located in your travel destination and enjoy your travel as planned.
• Self-Cheque: You can use it to withdraw cash or transfer funds between your bank accounts. In simple words, you write this cheque to yourself.
• Stale Cheque: Here the three-month validity has expired, making the cheque stale. This period is calculated from the date of issue.
• Cancelled Cheque: You can cancel cheque by drawing two parallel lines across its face with the words ‘Cancelled’. It serves as proof of your account details and is usually submitted at the time of withdrawing money from EPF, opening a demat account, etc.
• Account Payee Cheque: This cheque is written in favour of the payee, i.e. the person who will receive the amount in their account. The cheque must be deposited by the issuer at their bank, following which the latter will transfer the funds to the payee’s account.
• Mutilated Cheque: Any cheque received by a bank in a torn condition is termed as a mutilated cheque.
• Blank Cheque: A blank cheque is a cheque that has been signed with no monetary value written on it.

Choose from the different types of cheques to meet the specific purpose behind your financial transaction. For instance, if you want to withdraw cash a self-cheque is of use, likewise, a crossed cheque is helpful if you want the amount to be deposited in the payee’s account. Make sure to keep your chequebook safe to prevent fraudulent activities.While cheques help make timely payments, your vehicle helps drive and meet the people to whom you issue these cheques. Thus, a safely kept chequebook and a secure vehicle, both are equally important. You can secure your vehicle with suitable motor insurance and hit the road worry-free. Get your motor insurance today! Also Read: What is a Cheque Leaf? Meaning, Types & Features