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Difference Between Account Payee, Crossed And Bearer Cheques

IndianMoney.com Research Team | Posted On Saturday, March 16,2019, 05:21 PM

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Difference Between Account Payee, Crossed And Bearer Cheques

 

 

A cheque is a document that directs the bank to pay a specific amount from the drawee’s account to the person in whose name the cheque has been issued. A cheque is an important negotiable instrument and payments made through cheque are safe and convenient. A cheque comes in the printed form and is issued by the bank, when an account is opened. It consists of various fields where the drawee enters the amount to be paid, name of the person in whose name the cheque is issued, date and signature.

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Differences Between Account Payee, Crossed And Bearer Cheques

Though cheques have been in use for a long time, many people do not know the difference between various kinds of cheque and their purpose. Listed below are the different types of cheques:

Bearer Cheque:

When the words “or bearer” printed on the cheque are not cancelled, it is known as a bearer cheque. Bearer cheque can be transferred by delivery and does not require an endorsement. In simple words a bearer cheque refers to a cheque that is payable to the one who presents it at the bank. However, these cheques are risky because they can be misused. In case they are lost, the person who finds the cheque can encash it.  

Order Cheque:

When the words “or bearer” printed on the cheque is cancelled and the word ‘order’ is mentioned on the face of the cheque, this cheque is an order cheque. An order cheque is payable to the person specified therein as the payee, or to the person to whom the cheque is endorsed. So, the order cheque can be transferred by the payee by signing his/her name on the back of the cheque.

Uncrossed/ open Cheque:

When a cheque is not crossed, it is known as an open cheque or an uncrossed cheque. The payment for these kinds of cheques can be obtained from the bank counter. An open cheque can be a bearer cheque or an order cheque.

SEE ALSO:  What Is Account Payee Crossed Cheque And Bearer Cheque?

Crossed Cheque:

Crossing of cheque means drawing two parallel lines on the left corner of the cheque with or without additional words like “Account Payee Only” or “Not Negotiable”. Crossed cheque cannot be encashed at the bank counter. It is used to directly credit the bank account of the payee, making it a must safer instrument.

Anti dated Cheque:

A cheque where the drawer mentions the date earlier than the date on which it is presented to the bank, is called an “anti- dated” cheque. These types of cheques are valid up to 6 months from the date of issue.

Post-Dated Cheque:

If a cheque bears a future date (yet to arrive), then it is known as a post-dated cheque. A post-dated cheque cannot be honoured earlier than the date on the cheque.

Stale Cheque:

If a cheque is presented for payment after 6 months from the date of the cheque, it is called a stale cheque. After the expiry period, no payments will be made by the banks against this cheque.

What is a Bearer cheque?

As the name suggests, the bearer cheque is payable to the cheque holder/ bearer. The unique feature of a bearer cheque is that it does not contain a name designated as the payee. The bearer cheque is payable to the person who presents is at the bank for payment. A bearer cheque does not have any name written on it, just the specified amount authorized for withdrawal.

Bearer cheque can be transferred by mere delivery; they do not require endorsing. In simple words a bearer cheque can be described as a cheque payable to any person, without assigning his/her name. These kinds of cheques are highly risky as they can be misused when lost.

Bearer Cheque Withdrawal Limit:

There is no specified withdrawal limit on bearer cheque. In case a company or a firm draws a bearer cheque to withdraw funds for the payment of salaries to employees, the bank generally accepts the bearer cheque of higher amount and disburses the cash. But, a bearer cheque drawn in favour of an individual has limitations.

In case of a bearer cheque containing a withdrawal amount of above Rs 50,000, the bank must verify the identity and address of the individual before disbursing the cash.

Difference Between Crossed Cheques and Bearer Cheques:

Cheques are instruments that contain an order to pay a specified sum of money to the drawee’s account. Given below are the main differences of a bearer cheque and crossed cheque:

  • The bearer cheque does not contain the name of the payee and is payable to the person who presents it at the bank. A crossed cheque is a cheque drawn in favour of a specific person and the cheque contains two slanting parallel lines at the left upper corner of the cheque. This signifies that the payee is not authorized to encash the cheque directly at the bank. However, the cheque can be used to credit the bank account directly.
  • In case of a bearer cheque, the bank must do proper verification before making payment to the bearer of the instrument. In case of crossed cheque, the name of the individual is already mentioned on the cheque. So, the money is paid to the specified person only.
  • Bearer cheques are not safe and can be misused if lost. The person who finds it can go to the bank and collect the money. In case of crossed cheque the amount is directly credited to the bank account of the payee. Therefore, this is a much safer way to transfer money.

Bearer Cheque Withdrawal Rules:

A bearer cheque is generally drawn in favour of a payee whose name is not mentioned on the cheque. So, handling these kinds of cheques can be risky, because if a bearer cheque is lost, the person who finds it becomes the bearer of the cheque and is eligible to collect cash from the bank. There are certain rules for withdrawal of bearer cheques:

  • According to the RBI guidelines, in case a transaction is being carried out by a non-account based customer or a walk-in customer where the amount of money is equal to or exceeds Rs 50,000, the bank must verify customer’s identity and address before disbursing the cash.
  • The bank will not ordinarily insist on the presence of an account holder for making cash withdrawals in case of ‘self’ or ‘bearer’ cheques, unless the circumstances so warrant the need. The banks should pay self or bearer cheques, taking the usual precautions.
  • The Reserve Bank has cautioned banks in India to be careful while encashing bearer cheques, if the amount exceeds Rs 50,000 and insists on the KYC verification of the customer in such an event.
  • In case an individual is tendering the instrument and is not carrying any identity proof or address proof and there is an urgency need for cash, then the transaction must be referred to the branch manager. The branch manager shall make appropriate enquiries with the payer/ account holder and the transaction is allowed at his/her discretion.

Account Payee Cheques:

An account payee cheque is a highly secured type of cheque as the specified amount can only be paid to the account holder. The payee cannot endorse the cheque to anyone else. The account payee cheque can only be encashed by depositing at the payee account. This helps in secure payments to the payee only and protects from any kind of misuse.

How to Write Account Payee Cheque?

To write an account payee cheque, you have to cross two lines on the left corner of the cheque and write “A/C payee only” between the two lines. Remember, if you simply cross the cheque and do not mention the words “account payee”, it will become a crossed cheque and not an account payee cheque.

Importance of Account Payee Cheque:

The reason why you issue account payee cheque in the name of the payee is because it’s safe. There are minimum chances of misuse of an account payee cheque, as the cheque can be encashed only by depositing it in the payee account. The payee cannot further endorse to anyone making the transactions through account payee cheques, safe. Account payee cheque is valid only up to 3 months.

How to Fill a Cheque for Self-withdrawal?

Writing a cheque is very simple. The image given below demonstrates the fields that are present in the cheque.

  • You must first mention the date on which the cheque is issued.
  • As the bearer cheque does not contain the name of the bearer, the issuer must write ‘self’ or ‘pay to the order of cash’.
  • You have to then mention the amount of money you want to pay in the rupees section. Make sure to write ‘Only’ after writing the amount in words. Do not leave space before writing the numbers in words and strike out any empty spaces.
  • Mention the amount of money in numbers and put ‘/- ‘ mark at the end.
  • Lastly, sign on the space provided above the Authorized Signatory text.

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