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A cheque is not just a piece of paper. Know more

May 14, 2010 14:23 IST

A cheque is not a mere a piece of paper. It's imperative for you to know more to ensure that you don't end up losing your hard-earned money.

1. What is the difference between a bearer cheque and  an A/c payee cheque?

A bearer cheque can be encashed over the counter by the person who presents it in the bank. However, in case of an A/c payee cheque, the money would be credited into the account of the person to whom the cheque is addressed.

2. What is a personalised cheque?

In a personalised cheque, your name would be written on the cheque leaf just below the space where you are supposed to sign it.

3. What is cheque stop payment?

In simple words, you can request your bank in writing to register stop payment instructions in respect of cheques issued or lost by you. A service charge may be debited to the account for this purpose.

4. What does dishonour of cheque mean? When does a cheque get dishonored?

When you make payment through a cheque to any individual, firm, institution, etc., the person to whom you give the cheque presents it in the bank in which he maintains an account. The bank sends the cheque for clearance and, once it is cleared, it honours the cheque and releases the payment to him.

However, the bank may not honour the cheque on certain grounds, such as if there are not enough funds in your account; your signature does not match on the cheque; there is a difference between the amount mentioned in words and figures; if the cheque is more than six months old, etc.

This means the concerned party will not receive the money and, additionally, you may have to pay cheque bounce charges to the bank. Under the provisions of Section 138 of the Negotiable Instruments Act, 1881, such dishonoured cheques may attract punitive action.

Further, the bank reserves the right to take steps to get the account closed if it is observed that cheques drawn in the account have been frequently returned for want of funds in the account.

5. Is it important to maintain a list of payments made through cheques in the space provided in the cheque book?

Payment made by cheque is an effective way of ensuring that all your financial dealings are properly reflected in your bank account. A separate page, called a record slip, comes with your cheque book. It is like a blank passbook.

It is the place where you can write the details of what you do each time you use your account. Every time you put money in, take out cash, or write a cheque, make sure you note the details.

It's a good way for you to have a record of all your important financial transactions, such as buying a house, a car, etc.

The record slip also helps to ensure that no mistakes have been made by the bank in crediting or debiting your account.

6. Why is it important to write the date on a cheque?

Once you draw a cheque, it's valid only for six months. This means that the cheque can't be encashed after six months from the date mentioned on it. If you want to write a post-dated cheque, write the date only after which it can be encashed.

A cheque presented for collection six months after the date of issue of the cheque is treated as an 'out-of-date or stale' cheque.

7. Is it important to write the amount to be paid in figures as well as in words?

Yes, it's important to write the exact amount in figures as well as in words. This is to double check the amount to be paid. Banks may not honour a cheque if there is mismatch of the amount in figures and in words.

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