The benefit of crossing is that it decreases the risk of unauthorized negotiables obtaining and cashing a check. A crossed cheque may only be cashed in a bank if the check’s payee is a client. An open cheque does not have any crossing marks on its face and is generally issued to the bearer.
- We have to Look for the Cheque Case Filing Process if it Bounced Already.
- Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.
- In such cheques, you have to draw two parallel lines on the top left corner of the cheque and you can write the words “Account Payee Only” or “Not Negotiable” with it.
The cheque gets stale after three months, and the drawee bank may refuse to pay the amount. The drawer can revalidate the cheque if it becomes obsolete owing to the expiration of the validity term. Thus, the paying banker will honor the cheque only when it is ordered through the bank mentioned in the crossing or its agent bank. In this case, the paying banker will pay the amount of cheque only to the banker whose name appears in the crossing or to his collecting agent. But, the words ‘not negotiable’ are significant as they restrict the negotiability and thus, in the case of transfer, the transferee will not give a title better than that of a transferor.
Thus, he becomes the holder in due course and acquires an indisputable title to it. Also, when the instrument passes through a holder in due course, all the subsequent holders also receive a good title. Crossed checks are rarely used in the United States, and anyone attempting to deposit one is likely to encounter problems. In simple words, a cheque is tagged as a critical document that could be used by an individual, organization, or government for the transaction of varied fund values. In below image, I mentioned few best practices while writing cheque.
History of the Cross Cheque
In general crossed cheque, two parallel lines are drawn on the cheque, either on the sides or across the entire cheque. This means that the money can be deposited only into the payee’s bank account. However, it can be deposited in any bank as the name of the bank is not specified in such cheques. These cheques are crossed to minimise the risk of misappropriation or loss of identity. A cross cheque is a negotiable instrument that specifies a general instruction for a check that has not yet been deposited into a bank account.
Crossing a Cheque
The cheque stays non-negotiable, and the transferee’s position will not be superior to the transferor’s title. So by mere crossing you are no longer making payment to PAYEE ONLY. The payee can further endorse or cash it according to his wish.
But this activity is generally discouraged because it eliminates the protection the payer originally set in place. The effect of such a crossing is that it removes the most important characteristic of a negotiable instrument (according to section 123). How many types of cheques are in use depends on elements like who is the issuer and who is the drawee. Based on these essentials, we explore the different types of cheques in India. The precise formatting can vary between nations, but two parallel lines are the most frequently used symbols.
Why Do We Use Cross Cheque?
Also in case of dishonor of cheque (in the above example), Mr.Rohan can sue Mr.Satish and in return Mr.Satish to me and finally I can sue to the drawer of cheque. The finance sector offers many payment options to enable secure transactions. One of the widely used payment options by customers is a crossed cheque. In this blog, we will discuss what a crossed cheque is, how it works, its benefits, and why it is an important tool to initiate safe transactions. It should be noted that not all cross cheques are forged and many people do not even know about it until banks start enquiring about them. These are treated as dishonoured debts and come under attachment proceedings in courts.
The open cheque can be taken directly to the bank and can be enchased by the cheque holder. There are no formalities or verification processes on the part of the bank issuing the cash. The cheque bearer receives the money from the bank and can access funds immediately in case of emergencies. Since a crossed cheque can only be deposited in the bank, it cannot be used by unauthorized individuals. It can be tracked by the bank and the tracking information is shared with the payee. Crossed cheque can be used for a variety of purposes, including business transactions and personal finances.
Instead of cashing it to my bank account I can further endorse the cheque to anyone, for example to Mr. Satish by writing and signing on back of cheque leaf. Further Mr.Satish either can encash this cheque or he can endorse to someone, for example to Mr.Rohan by writing and signing on back of cheque leaf. The bank issues these cheques on behalf of an account holder to make a remittance to another person in the same city.
Cross Check royalty-free images
A special crossed cheque has the name of a specific bank between the two parallel lines. This means that the cheque can only be deposited into an account held at that particular https://1investing.in/ bank. It also holds necessary that the payee must hold an account in that particular bank. The drawee may suffer a loss due to the non-acceptance of payment for the instrument.
Both the drawer and the bearer will have access to the cross when the crossing is missing on the cheque. Cheque transactions often include three participants, and the drawer is the individual responsible for the accounts and has the power to write and sign cheques. As a result, the person writes cheques from their bank account.
This provides a level of security to the payer because it requires that the funds be handled through a collecting banker. These cheques cannot be encashed at the cash counter of a bank but can only be credited to the payee’s account. Payee’s name appears on the cheque, indicating that the cheque holder can accept the cash. Therefore, if the drawer crossed cheque image has to withdraw funds from their accounts and use a cheque, then they must put SELF in the payment area of the cheque. For Special Crossing cheques, there is a requirement for the name of the banking institution to be mentioned on the cheque. This form of crossing has the consequence of funding the cheque exclusively to the intended recipient.
Foreigners on vacations carry traveller’s cheques instead of carrying hard cash, which can be cumbersome. These cheques are issued to them by one bank and can be encashed in the form of currency at a bank located in another location or country. Traveller’s cheques do not expire and can be used for future trips. A cheque is a document you can issue to your bank, directing it to pay the specified sum mentioned in digits as well as words to the person whose name is borne on the cheque. The main reason to use the provision of a crossed cheque is its low-risk factor. The following points explain how a crossed cheque is a safer means of transaction as compared to an open cheque.
These lines are sometimes paired with the words ”& Co.” or ”not negotiable.” The importance of this type of crossing highlights that the cheque is not negotiable anymore. The usefulness of this crossing is that the cheque needs to be essentially paid to the bank. A cheque past its validity, three months after the date of being issued, is called a stale cheque. They are usually drawn on a bank or other authorised institution and are not subject to any discount.