Difference between Order Cheque and Bearer Cheque, Benefits

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Bearer Cheque

A cheque is a payment instrument written in the name of a person or a business to be paid on a specific date. A check is a form of payment used to transfer funds from one account to another.

It is typically used to make payments that are secure and convenient. It helps transmit vast quantities of money and minimizes the need for physical currency in amounts.

Difference Between Order Cheque And Bearer Cheque

Bearer Cheque Meaning

A bearer cheque is payable to the person who holds the cheque. A bearer cheque does not have a payee named on it, and the individual who has one can take it to the bank to have it cashed. The amount permitted for withdrawal is written on a bearer cheque, which has no name. A bearer cheque can be transferred by simply delivering it; no endorsement is required.

In other words, A bearer cheque can be made payable in cash or a specific person’s name. The term “bearer” does not appear on the bearer cheque. The drawee bank pays the cheque to the bearer or presenter of the cheque over the counter.

A bearer cheque can be passed on to someone else. The transferor of a check does not need to endorse it when passing it on. When submitting a bearer check for encashment, the bank does not require identification.

However, if the cheque amount is significant, the bank may request identification to verify the transaction. To certify the receipt of funds from the bank, the encasher must sign on the reverse of the bearer cheque.

In basic terms, a ‘Bearer cheque’ is a cheque payable to anybody who presents it for payment at a bank counter.

Write A Bearer Cheque

  • Date:- You must start by stating the date the cheque was issued.
  • Pay:- The issuer must write “self” or “pay to the order of cash” because the bearer cheque does not contain the bearer’s name.
  • Amount:- In the rupees area, you must specify the amount you wish to pay.
  • Signature:- Finally, sign above the Authorized Signatory on the area given.

 

Rules For Cashing A Bearer Cheque

A bearer cheque is written in the name of a payee who is not named on the cheque. Handling these types of cheques may be dangerous since if a bearer cheque is misplaced, the person who discovers it becomes the bearer of the cheque and can receive cash from the bank. As a result, there are specific guidelines for cashing bearer cheques:

  1. According to RBI rules, whenever a transaction involving a non-account-based client or a walk-in customer consists of a sum equal to or more than Rs 50,000, the bank must verify the customer’s name and address before disbursing cash.
  2. Unless the circumstances warrant it, the bank shall not require the presence of the account holder while making cash withdrawals from ‘self’ or ‘bearer’ cheques. Banks should pay self-pay or bearer cheques with ordinary prudence.
  3. The Reserve Bank of India has warned banks to be cautious when cashing bearer cheques worth more than Rs 50,000 and to insist on customer KYC verification in such cases.
  4. If an individual presenting the instrument does not have any form of identification or proof of residence and the transaction is urgent, the transaction must be directed to the branch manager. The branch manager will conduct relevant inquiries of the payer/account holder and will authorize the transaction based on his judgment.

Withdrawal Limit For Bearer Cheques

There is no upper limit to a bearer cheque.

When companies and huge enterprises need cash to pay salaries and wages, the  bank accepted cheques for more significant sums, which were then dispersed as salaries and payments to workers and employees.

  • In this scenario, the bank can assist the customer.
  • On the other hand, individuals are subject to the bank’s different limitations.
  • A bearer cheque was once used by political parties to withdraw significant quantities of money.
  • On the other hand, banks used to be cautious regarding high-value bearer cheques, never releasing cash without first establishing the cheque’s true purpose.

A bearer cheque drawn in the name of an individual, on the other hand, has some restrictions. Before disbursing cash, the bank must verify the individual’s name and address if the bearer cheque has a withdrawal amount of more than Rs 50,000.

Payment Of A Bearer Cheque In Cash

A bearer is a person who has a bearer instrument. The bank cannot refuse bearer cheques. However, before payment, the holder must sign on the reverse of the cheque to acknowledge receipt of the funds.

Purpose Of Bearer Cheque

A bearer cheque benefits from not having to be “cleared” every time it is handed from one person to another. Most UK checks now include a pre-endorsed “Account Payee” endorsement, indicating that the cheque can only be cleared by the account person identified as the Payee.

When dealing with advance payments when the stock/commodity has the same Bill of Lading/Airway/Roadway Bill, this is an excellent safe protection for ordinary Joe Public. Still, this is a perfect safeguard for business and specific Exchanges such as the Commodities and Stock Market. It indicates that the stock is followed by a cheque.

A bearer draft/cheque indicates that whoever has it has a title. As a result, the check becomes a “Negotiable Instrument,” which may be exchanged like cash but is easier to track.

It also eliminates the need to clear and issue a new document each time the Forein Exchange is negotiated. No matter whose hands it is in, the money is still owned by the bank that issued it, and it functions similarly to a $ or GB£ note in many ways.

A Bank Note in the United Kingdom has the endorsement “I pledge to pay the bearer…” (along with the note’s value). Because it is a prepaid instrument, like currency, a bearer draught functions similarly and is as good as cash. Even better, unlike $ or £ bills, it can be traced.

Also, you don’t need that many notes to make up the value because the bank keeps them in stock and promises to pay the bearer of the document the value wherever it is deposited, which includes going into the bank where it is drawn on, usually Head Office, and converting it to any other form of a negotiable instrument. Gold or precious metals, as well as oil and food goods, might fall under this category.

Its main flaw is that it cannot be stopped. However, it may be readily redirected and swiftly if it falls into the wrong hands. The money is lost unless you know that it has been misappropriated before being handed to the Guarantee Bank.

That is why it is such a versatile tool, but it also has a significant danger of fraud. However, it may help international trade move more quickly when used correctly. Telegraphic Transfer in the UK is a system called CHAPS (Clearing House Automated Payment System), a real-time, irreversible transfer between banks and their clients of other banks. It has been taken over to some extent by Wired Funds.

A Bearer Draft, on the other hand, can travel through as many hands and in as many countries/currencies as needed without re-issuance.

DON’T THROW IT AWAY! It’s a really important document.

Advantages And Disadvantages Of A Bearer Cheque

Advantages

  • Obtaining payment of a bearer cheque at the counter is relatively simple.
  • Negotiating a bearer cheque is simple because it does not require endorsement during the process.
  • It’s appropriate for making little payments.
  • A person who does not have a bank account can get payment of a cheque from the bank without the need for signature verification or attestation.
  • A bearer cheque can be turned into an order cheque.
  • A bearer cheque has the advantages of being as good as currency and being passed from one person to another.

Disdvantages

  • A bearer cheque is not secure since it can be paid to anybody, whether an actual payee or a criminal.
  • Due to the high risk of a bearer cheque, it is not suited for large payments.
  • There is no trace of a bearer cheque’s movements because it is handed from hand to give without being recorded.
  • Its drawback is that it may be tampered with and used to perpetrate fraud.

The Difference Between An Order Cheque And A Bearer Cheque

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 between a bearer cheque and an order cheque:

  1. A bearer check does not include the payee’s name and is made payable to the individual who submits it to the bank. Whereas an order cheque is a check drawn in the name of a single individual or person, the cheque may be presented to the bank for encashment by that individual alone.
  2. In the event of a bearer check, the bank shall conduct appropriate verification before paying the bearer of the instrument. In the event of an order cheque, the individual’s name is already printed on the cheque. As a result, the money is sent to the selected individual exclusively.
  3. A bearer check can be transferred simply by delivery because it does not require endorsement, but an order cheque requires acceptance and delivery.

Benefit Of A Bearer Cheque

A Bearer Cheque can be transferred to a third party simply by presenting the cheque to the third party. As a result, it can be freely transferred to any recipients before the cheque’s expiration date. Moving this cheque to a third party does not necessitate the use of an endorsement.

Bearer Cheque

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What is the meaning of the Bearer Cheque?

A bearer cheque is payable to the person who holds the cheque. A bearer cheque does not have a payee named on it, and the individual who has one can take it to the bank to have it cashed.

What is the Benefit of the Bearer Cheque?

A Bearer Cheque can be transferred to a third party simply by presenting the cheque to the third party. As a result, it can be freely transferred to any recipients before the cheque’s expiration date. Moving this cheque to a third party does not necessitate the use of an endorsement.

What are the Advantages of the Bearer Cheque?

Obtaining payment of a bearer cheque at the counter is relatively simple.
Negotiating a bearer cheque is simple because it does not require endorsement during the process.

What are the Disadvantages of the Bearer Cheque?

A bearer cheque is not secure since it can be paid to anybody, whether an actual payee or a criminal.
Due to the high risk of a bearer cheque, it is not suited for large payments.

What is the withdrawal limit for bearer cheques?

There is no upper limit to a bearer cheque. In this scenario, the bank can assist the customer. On the other hand, individuals are subject to the bank’s different limitations. A bearer cheque was once used by political parties to withdraw significant quantities of money.

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