Check is a written unconditional instrument which is signed by the signatory of the bank account holder to order the issuance of the payment mentioned over the check. The bank is bound to pay the amount mentioned over the check by the order of the signatory on demand.
Types of Checks
Bearer check – this type of checks contain a text “Or Bearer” over it which enables any person carrying it to get cash from the bank that issued the check book. These types of check are very risky because if such checks are lost, anyone who finds it, can collect payment from the bank. In order to avoid the wrong use of bearer checks, banks are asking for national identity card photo copies now-a-days from the person who comes to the bank for collecting payments.
Order check – This is the type of check which contains a text “Or Order” over it or if it is not written, then by crossing out the word “Or Bearer”. An interesting thing about this type of check is that it can be transferred to someone else and for this, the person or entity whose name the check was issued, writes the name of the person or entity to which he or she is transferring the check and signs it at the back of the check.
Crossed Check – When two parallel lines are drawn over the face of the check, it becomes crossed check. Between these two lines, it is optional to write words such as Account Payee Only, A/c Payee. What is important here is just the two cross lines over the face of the check. This type of check cannot be cash out from the cash counter of the banks. Instead, it is credited to the payee’s bank account. So, the transaction may take 2 to 5 days and if the check belongs to other country, it can take 2 months as well.
Uncrossed/ Open Check – Where there is no parallel line drawn over the check, then the person whose name is written over the check, can cash out from the cash counter. He or she can transfer the check as well by writing and signing on the back, the name of the person to whom he or she wants to transfer this check.
Post Dated Check – when the check contains a future date over it, it cannot be deposited into bank for collection. That is why, it is called Post dated check. One can collect the payment of the check when the date mentioned over the check falls due.
Stale Check – Checks remain valid for payment within 06 months from the date mentioned over the check. In some countries, this period is 03 months. Let’s suppose that if the check date is 1st January, 2017 and the check is presented for collection on 1st July, 2017. Bank will not accept the check as it has crossed the limit of 06 months. This check is called Stale check and is of no use.