A cheque forms a part of the active financial body and thus it is a vital tool for sending and receiving money without transferring cash physically.
A cheque is known to be a vital document used by a person, organization or government for making transaction of varied values of funds.
What Is a Crossed Cheque?
If you wish to make a successful transfer of a cheque, it is crucial that as an issuer you maintain one a savings or current account in a certain bank branch.
It will ensure a hassle free fund transfer process. Fund transfer via electronic modes have become so very popular these days, but cheque transactions are still considered to be a secure way of fund dealing with several business throughout the country.
Crossed cheque is a cheque that is crossed along with 2 parallel lines across the entire cheque or via the cheque’s top left-hand corner.
It means that you can deposit the cheque only into the bank account directly and can never be cashed immediately by any bank or other credit institution.
Why Should You Cross Cheque?
- If cross a cheque it offers proper instructions to any financial organization about handling of fund.
- A crossed cheque is identified by usually drawing either 2 parallel lines vertically across a cheque or on the cheque’s top left corner.
- Words such as “and the company” and “not negotiable” might be present between the two lines. If the lines are not adjusted with words, then also it would not change the crossed cheque’s purpose.
- With the help of crossed cheques, cheque writer might protect any amount that is transferred from getting cashed by any unauthorized individual or stolen.
- The format of crossed cheques might vary between different countries due to its format and statements.
- As crossed cheques can be paid only via bank account, any beneficiary’s record of transaction might be tracked later for any further query or clarification.
How Does A Crossed Cheque Work?
Using a crossed cheque will assist cheque writers to simply and effectively protect any cheque that they write. Crossed cheques are actually used in countries across Asia as well as Europe, Mexico and Australia.
It provides a certain instruction to a bank or financial institutions about how any fund should be handled. Commonly a crossed cheque is used to make sure that any bank deposits only the funds into one real bank account and never cashes it immediately upon receiving it initially. It offers security level to any payer because it needs the funds to be well handled via any collecting banker.
The exact format and words present on each crossed cheque can vary across nations but the very common thing that is involved in any crossed cheque is drawing of 2 parallel lines. “Account Payee” this phrase is also written on some cheque and it performs similar function of crossing a cheque.
If any cheque is crossed, as a payee you can never uncross it. Moreover the cheque will be considered to be non-transferable and it can never be transferred to any third party. The payee can only deposit it in that account which is in his own name.
The payer will be able uncross it by writing across the cheque’s front the words “Crossing Cancelled”. But it is never recommended generally. It eliminates all the protection a payer had originally.
In some payments like treasury and refund orders of Income Tax, you need to acknowledge an amount receipt along with the essential stamp which is needed for the refund of the order. But during cheque crossing, no such registration of official stamp is required under Stamp Act.
What Are The Types Of Cross Cheques?
- General Crossing: It includes few words in between two lines that are drawn and symbolize the crossing of a cheque. It states that the bank on which the cheque is drawn will never permit the payment in another bank. So payment can be only done in that collecting bank.
- Special Or Restricted Crossing: In such a scenario, the cheque contains the bank’s name with or without “not negotiable” words. It depicts that payment can be only done to that concerned bank.
- Not Negotiable Crossing: It means that you can transfer the cheque but can never negotiate it. In these cases, the holder of the cheque will only bear the transfer title.
- Account Payee Crossing: In this case, you can never pay the amount in another bank account apart from that mentioned in your cheque. If you practice an account payee crossing it will ensure that the amount of money gets transferred only to a bank account and is never given in liquid cash form.
Crossing one cheque offers proper instructions to a bank or financial institutions about how carefully funds should be taken care of. If a payee does not have funds for covering cashing of a cheque, the bank will be held responsible for any related loss.