Open Cheque-Normally, It is seen that some Cheque books issued by the bank are already having bearer cheques or order cheques. Because you will see a word written on the cheque “or bearer“, “or order“. And these words define a cheque as a bearer cheque or an order cheque that can be used for payment to someone but is not safe. And these cheques are called open cheques or uncrossed cheques.
In simple words, an open cheque is a cheque that is not crossed and it may be a bearer and or order cheque. It can be further transferable to the third person.
Contents of this post
What is the Open cheque?
An open cheque is basically an uncrossed cheque. This cheque can be encashed at any bank, and the payment can be made to the person bearing the cheque. This cheque is transferable from the original payee (the original recipient of the payment) to another payee too. The issuer needs to put his signature on both the front and back of the cheque in case of endorsement. Open cheques include bearer cheques or order cheques.
Images of an Open check
How can you identify an Open check?
You can identify an open cheque as a bearer cheque or an order cheque when you see the words “Or bearer” or “or order” printed on cheques. And make sure, the cheque should not be crossed or the account payee.
What are the features of an Open cheque?
These are the feature of the open cheques-
- It is a negotiable instrument.
- This cheque may be an “or bearer” or “or order”
- It can be encashed by the named person or anyone who presents a cheque.
- Can be passed onto another person by mere delivery.
- Open cheque is very risky.
- Generally, Identification is not required in an open cheque.
- Endorsement is not required in the case of a bearer cheque.
- Endorsement is required in case of an order cheque.
- It can be deposited into the named bank account or can be cashed.
- It must be an uncrossed cheque.
What are the remembered point while issuing an Open cheque?
- Though there is no rule of taking the signature of the holder of the cheque at the time of its encashment. But for safety purposes, the bank asks the bearer to sign at the back of the check in the presence of the cashier. This is to confirm the receipt of the funds from the bank.
- Further, the paying cashier does not need to take many precautions to decide the faithfulness of the payee’s ownership. Nevertheless, the bank doesn’t ask for identification proof of an open cheque, but when the amount is substantial, the bank may ask for identification proof.
- The transfer of such cheques takes place through simple delivery. This means that if you take the cheque to the bank, the bank issues payment to you against the cheque. Further, no additional authorization from the issuer is necessary in this case.
- If a person with an open cheque for an amount of ₹ 50,000, the bank has to authenticate the identity of the person and ask for proof of address. The bank has every right to first check the details, and once verified, it can make the payment to the person.
- In case a bank finds something amiss, the bank can demand that the account holder, i.e. the issuer of the said cheque, visits the bank in person as well.
- A Know Your Customer (KYC) verification process becomes mandatory if the amount on an open check is more than ₹ 50,000.
- If a bank suspects the bearer of the cheque who may consistently request immediate cash payment, the bank manager can intervene. The bank manager can contact the account holder and describe the situation. If the account holder sanctions authority, the bank manager asks the concerned bank personnel to clear the open cheque.
- A bank cannot deny the payment of the amount on an open cheque to the person who presents it. If required, the bank can ask the bearer of the cheque to sign on the rear side of the cheque
How do you fill out an Open cheque?
These are the steps to fill an Open cheque-
- Take a fresh cheque.
- Enter the Date in the right top corner
- Then enter the Recipient Name.
- Fill in the amount in numbers.
- And write the amount in words.
- Sign the cheque.
- And make sure it is a bearer cheque or an order cheque.
What is the difference between an Open cheque and a crossed cheque?
|points||open cheque (uncrossed)||crossed cheque|
|Meaning||An open Cheque is one payable to the bearer or order, i.e. holder who carries and presents the cheque at the bank counter gets the payment.||A crossed cheque is a cheque payable only in the bank account of the person named on the cheque or endorsed third person.|
|Identification word||At the end of the name of the payee, you will find the word ‘or bearer’ or ‘ or order on it.||Two parallel lines on the top left corner or anywhere on the cheque is called crossed cheque.|
|Encashment||Any person can encash the cheque by any person holding or carrying the cheque.||Only the payee can deposit the cheque into his bank account. No encashment is allowed.|
|Transferred through||Simple delivery in “or bearer” cheques and endorsement in order cheques.||Proper endorsement|
|Receipt||The recipient’s signature acts as a receipt itself.||The signature of the payee of the cheque acts as an endorsement only.|
|Banker’s Responsibility for payment of funds to the wrong person||No responsibility of the banker or drawee.||Banker or drawee will be held responsible.|
|Conversion||The drawer can convert an open cheque into a crossed or account payee cheque.||Crossed cheque can be converted into an A/c payee cheque.|
Should I give Open cheques to my suppliers?
If you want to be secure from fraud or misuse of cheques then you should not provide an open check to your suppliers at any time. You should check always the word mentioned over the cheque ” or Bearer” or order and must strike out “or Bearer, or order”. You should always provide an A/c Payee cheque or crossed cheque.
Who can withdraw the Open cheques?
These are the persons who can get the amount mentioned over the open cheques-
- The person whose name is mentioned over the cheque means the recipient can deposit into his account by depositing the cheque.
- And the named recipient can also encash by visiting the branch after showing IDs if demanded.
- Any third person holding a bearer’s check can encash the cheque by visiting the branch after showing IDs if demanded.
- If there is no name mentioned on the bearer’s check, Then the individual presenting the cheque to the bank for encashment is only liable to get the entire payment.
How long is an Open cheque valid?
Normally, a cheque will be valid up to three months from the date mentioned over the open cheque. Hence after three months from the date on the cheque, it will be invalid and can not be cleared or encashed.
How can I cash my Open check?
If it is an open cheque
- You need to visit any branch (in the city) of the bank that the cheque belongs to
- then Present it for clearance
- The bank clearance system, will verify the details on the cheque and clear it
- The cheque will be cleared and the person whose name is mentioned over the cheque or any third person by authorization will get the cash.
Faqs on Open cheque
There are seen many types of cheques which you need to understand. Here is the link for the different types of cheques provided plz go through and read- the types of cheques
Yes, the person whose name is mentioned on the cheque can deposit the cheque into his bank account. And this cheque can be encashed or transferred to a third person also.
Yes, open cheques can be transferred to the third person by simple delivery or endorsement if required.
No, It is not safe compared to a crossed or account payee cheque. Because account payee cheques can be deposited into the account of the named person only. And it can not be encashed.
Yes, Cash can be withdrawn because the open cheque means, a bearer cheque or an order cheque.
A cheque will be an open cheque when the word ” or bearer” or ” or order” is mentioned over the cheque. And it is not crossed.
it’s not mandatory to sign behind the cheque. but may be required by the bank to check the payee’s identity.
An Accountant, GSTP, GST blogger, Website Creator, SEO Builder & Co-founder of the website https://gstportalindia.in for the help of GST Taxpayers of India. Having a perfect accounting experience of more than 10 years in a Private Ltd Company.