A cheque is one of the standard payment instruments in India. It revolutionized the transfer of money and exhibited dynamic tendencies.
Payments can be made using cheques in a convenient, protected, and responsible way. Since actual cash is not used in the procedure, there is less risk of fraudulent activity. This makes cheques a safer alternative.
There are different types of cheques. Here, we will focus on Bearer Cheque and Order Cheque.
A cheque is referred to as a bearer cheque if the words "or bearer" that appear on its front are not removed. Any other party that brings the bearer cheque to the bank for payment as well as the person named therein is eligible to receive a payout.
Such cheques, however, carry a certain amount of risk. If a bearer cheque is misplaced, the receiver may claim the bank's money.
In other words, the bank from which the cheque is written makes these cheques available over the counter to the bearer or presenter of the cheque. It can be transferred by a simple receipt, without the need for the transferor of the check to approve it.
For instance, Krish (the drawer) signed a cheque, and Ravi is the recipient. Ravi has two options for getting the check cashed: he may go to the bank alone or send someone else. The bearer's identity shall not be subject to authentication.
Even though bearer cheques can be risky, they have a few advantages. They are listed below -
Receiving bearer cheque payments at the counter is fairly simple
Since the negotiation does not need approval, bearer cheques are simple to deal with
It is useful for making small transactions
Without the necessity for signature verification and certification, those who do not have a bank account can quickly collect payments by cheque from the bank
They can be turned into order cheques easily
A cheque is referred to as an order cheque when the word "bearer" that normally appears on its face is crossed out and the words "or order" are placed in its place. Such a check is payable to the payee named therein or any other individual who has been authorized (transferred).
The individual whose name appears on these cheques receives payment from the bank. This indicates that the bank is required to pay money only to the payee or the person who has been given an order.
As a result, the payee could either claim the money in person or give written consent to another party to do so.
For instance, if a cheque is signed with the name Arjun, only Arjun can go to the bank to have the order cheque processed.
Order cheques have many advantages, some of which are listed below -
It is a safe method of payment, as banks pay after verification
It is useful for making big transactions
It cannot be transferred without a signature, which makes it easier to trace
The cheque that has the term bearer crossed out is the order cheque. The check immediately transforms into an order cheque when the term bearer is canceled.
Here are some other differences between a bearer cheque and an order cheque -
| Bearer Cheque | Order Cheque |
|---|---|
|
No identity verification needed to withdraw money |
The identity of the payee is verified before encashing the cheque |
|
Highly convenient and fast, but less secure |
Very secure, but the processing might take time due to identity verification |
|
Loss of this cheque might lead to loss of money, as anyone who finds it can encash it |
Loss of this cheque doesn’t necessarily lead to loss of money, as only the person mentioned on the cheque can encash it |
A cheque is a document that allows one to take money out of a bank account. It must include the payee's name, the amount to be paid, and the date to accomplish this. It is one of the more popular forms of payment, but its use has decreased as more people prefer making payments electronically.
If the phrases or bearers are not removed, an order cheque may be a bearer cheque. The cheque may occasionally be issued to pay in cash. This is referred to as a cash cheque.
Cash check issuance is often discouraged due to the fraudulent risk involved. Some banks may impose a charge for the encashment of third-party cheques.
Additionally, an order cheque is safer to use for payment than a bearer cheque. This is so that the individual presenting the check at the counter may authenticate himself to the person collecting payment. The cashier releases the funds if he is satisfied with the details given.
Cheques, where the drawer and payee are the same person, are called self-cheques. Cheques where the drawer and the payee are different are called bearer cheques.
Yes, if the person fails to pay the full balance, it can bounce. The bearer can then file a case under Section 138 of the Negotiable Instruments Act.
According to the Reserve Bank of India, a bearer cheque is valid for three months. After that, the cheque becomes stale and banks will not accept such cheques.
The three parties involved in a cheque payout are:
It is a six-digit number that is printed on every cheque leaf.
There is no withdrawal limitation on a bearer cheque. Before handling any money transfers above 50,000, the bank will first confirm the customer's identification.
In the instance of a bearer cheque, neither the banker nor the drawee is accountable. Therefore, the bank would not be responsible if it paid the bearer of a stolen check.
However, the paying cashier is required to conduct a preliminary investigation into the recipient's identity in the case of an order cheque. When he is satisfied with the information presented, he can make a payment. Conversely, the bank (drawee) will be held liable if the cashier pays money to an unauthorized individual.
Yes, a bearer cheque is also referred to as an uncrossed or open cheque. This cheque does not require endorsement and can be transferred simply by delivery. From the date of issuance for up to three months, the check is negotiable.
An order cheque can only be cashed by the party or person in whose name it has been drawn. To cash the cheque, the individual collecting it must present identification.
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