From time to time, we withdraw money from our bank account using different options. Some of the options the banks offer are withdrawing through ATMs, cheques, and withdrawal forms. Each one has its convenience and inconvenience depending upon the amount of money we want to withdraw. Withdrawing money using cheques is more convenient for a larger amount of money. There are also different types of cheques. Here, we will have a look at what a cheque is, how to fill cheque, how to withdraw money using it, different types of cheques and their functions.
What is a cheque?
A cheque is a bill which is used to order a bank to transfer money from an individual’s account to a person whose name is written as a payee on the cheque. It should be filled properly providing the required information. It is one of the most common forms of transactions which have been used throughout banking history. However, with the increasing usage of various types of electronic payment, its usage has declined over the last few years. Nowadays, people are less acquainted with the cheque system.
Filling up a cheque
If you want to withdraw money through a cheque, it is very important to know how to fill cheque. If the bank finds any error in the cheque, it will be considered invalid. Following is the step-by-step guide on how to fill up a cheque.
- Write the date in the space provided at the top right corner of the cheque leaf. The format should be “DD/MM/YYYY”. A post-dated cheque can also be created. If you are wondering what a post-dated cheque is, we will discuss it below under the section “Different types of cheques”.
- Then, you need to write the name of the individual you want to pay. It is called “payee”. A payee can also be a business, it doesn’t have to be necessarily an individual. In case of self cheque, the payee should be filled as “self”.
- Next, you should write the amount in words and add the word “only” at the end. This will prevent the cheque from tampering. Then, the same amount should be written in numerical figures followed by the symbol “/-”.
- After all the spaces are filled, sign the cheque. While signing, you should use the same signature which was used at the time of account opening. If your signature doesn’t match, the cheque will be considered invalid or it can also be cancelled.
- While filling up a cheque, you should never overwrite. Overwriting will result in the cancellation of the cheque.
- It is advisable to sign the cheque only after filling up the amount. Do not leave the amount empty at any cost. It is highly risky, any person can find the cheque and misuse it by filling up any amount and encashing it from your bank. In case of an account payee cheque, a random individual cannot encash it as the amount is transferred directly to the payee’s account. However, the risk of the amount will still be there.
Some terms related to a cheque
- Drawer: The drawer is the account holder who writes the cheque and signs on it. He is basically the person who is paying the money.
- Drawee: Drawee is the bank to which the cheque is written. The drawer orders the drawer to deduct a certain sum of money to pay to the payee.
- Payee: The payee is the party who receives the transferred amount of money. The name of the Payee is whom the cheque is addressed to.
How to fill up a cheque when you are writing an account payee cheque?
Writing an account payee cheque is slightly different from that of other cheques.
- Start by obtaining a regular blank cheque from your chequebook.
- In the top-left corner, write the current date in the format of “DD/MM/YYYY”.
- In the space “Pay to the Order of,” the name of the person or company you want to pay should be written. Above or below the line, write the words “Account Payee” or “A/C Payee” and draw two parallel lines diagonally across the check.
- In the box on the right side of the check, write the numerical amount of the payment. Start from the left side and leave no gaps between the numbers. For example, if the amount is 5,000, write “5,000/-”.
- Sign the check in the lower right corner using your usual signature.
Different types of cheques
There are some other types of cheques.
- Bearer Cheque: A bearer cheque is payable to the person who possesses it. It can be cashed over the counter by the bearer or deposited into their own bank account. These cheques are risky as they are negotiable by anyone who has possession of them.
- Order Cheque: An order cheque is payable to a specific person or entity. It includes the phrase “or order” or “pay to the order of” on the payee line. Only the specified payee or someone they endorse the cheque to can receive payment.
- Post-dated Cheque: A post-dated cheque bears a future date instead of the current date. It can be used for future payments and is not to be cashed until the specified date. It provides a method for scheduled payments or when the issuer wants to ensure that the funds will be available on a particular date.
- Stale Cheque: A stale cheque is a cheque that is presented for payment after a specified period, typically six months (may vary by country and bank). Banks may refuse to receive stale cheques and the payee may need to obtain a new cheque from the issuer.
Cheque Bounce
This is a term used when the payment is declined due to several reasons like insufficient funds, signature mismatch, incorrect account number, damaged cheque, etc. In order to avoid cheque bounce, it is advisable to fill up carefully and make sure there is sufficient balance in the account.