A cheque is an instrument which is drawn in favour of a person or a company to make payments on a specified date. A cheque is issued to make payments from one account to another and is generally used to make safe, secure and convenient payments. It reduces the need of hard cash in payments and helps transfer large sums of money.
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As the name suggests a bearer cheque is payable to the bearer of the cheque. A bearer cheque does not have any name designated as the payee and the person having a bearer cheque can go to the bank for encashment. A bearer cheque does not have any name written on it, but just the amount authorized for withdrawal. Bearer cheque can be transferred by mere delivery; there’s need of endorsement. In simple words a cheque which is payable to any person who presents it for payment at the bank counter is called 'Bearer cheque'.
Writing a cheque is very simple. The image given below demonstrates the fields that are present in a cheque.
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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. So there are certain rules for withdrawal of bearer cheques:
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 cash. But a bearer cheque drawn in favour of an individual has some limitations. In case of a bearer cheque of withdrawal amount of above Rs 50,000, then the bank must verify the identity and address of the individual before disbursing the cash.
A bearer is payable to a person in possession of such an instrument. The bank cannot deny payment of bearer cheques. However, before payment, the bearer is required to sign on the back of the cheque as a token of having received the amount.
Cheques are an instrument that contains 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 an order cheque:
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