Question

Explain different types of cheques.

What are the various methods of making payment through a cheque?

Answer 1

1. Open Cheque: An open cheque is a cheque that is payable across the counter of the bank. It is of two types.
   1. Bearer Cheque: A bearer cheque is a cheque that can be encashed by anybody who presents it to the bank for payment. In such a cheque the word 'bearer' is suffixed after the name of the payee. A bearer cheque can be transferred from one person to another by mere delivery and without any endorsement. The bank is not liable to ensure that the payment is made to the right person.
   2. Order Cheque: An order cheque is payable to the person named in the cheque or his order. A cheque which bears the name of the payee without the words 'order' or 'bearer' is also regarded as an order cheque. An order cheque can be transferred only after endorsement and not by mere delivery. The person who presents the cheque to the bank for payment has to prove his identity. A bearer cheque can be converted into an order cheque by striking off the word 'bearer' and writing the word 'order'. But an order cheque cannot be converted into a bearer cheque by striking off the word 'order'.
      The payments of bearer cheques and order cheques are made at the counter of the bank. Therefore, these cheques are called 'open cheques'. Open cheques are not safe because if an open cheque is lost, anybody who finds it may get payment over the bank counter.
2. Crossed Cheque: A crossed cheque is one which is not payable across the counter of the bank. It can be collected only through a bank. It is paid into the bank account of the payee. The crossing of a cheque protects the drawer against theft, loss and forgery. A cheque is crossed by drawing two parallel transverse lines across its face, with or without any words.