Bearer Cheque - Meaning, Rules, Validity, and Advantages

What is a Bearer Cheque?

The bearer cheque's meaning is that it is a financial tool that allows quick payments, and the process is also very flexible. Any individual who has the bearer cheque or presents it in the bank can encash it.

The bearer cheque does not require any endorsement, and it can be passed just by handing it over to another person. There is high liquidity in the bearer cheque, and the transfers are also very easy and quick.

How to fill a Bearer Cheque?

Here are the simple steps that you should follow for writing a bearer cheque:

Step 1: Get a blank cheque from your bank.
Step 2: You have to write the date in the format of DD/MM/YY at the top right corner of the cheque.
Step 3: Now, in the space " Payee Name", write 'cash' or 'bearer'. If you want, then you can leave it blank or write the name of the payee. You can also add 'or bearer' with the name.
Step 4: Now, write the amount of payment in numbers and also in words.
Step 5: At the bottom of the cheque, add your signature.

You can also write a note or reference on the given line to specify the purpose of the payment. Also, before giving the cheque to the banker, confirm that the amount, date, and signature are correct.

Withdrawal Rules of Bearer Cheque

The rules of a bearer cheque depend on the policies of the issuing bank or financial institution. Here are some of the general rules that you should know while cashing the bearer cheque:

Sometimes, the bank can ask you to verify your identity by showing your valid ID before proceeding with your withdrawal.
There is no need to sign the back of the cheque because bearer cheques do not usually require endorsement.
To withdraw the funds, you must have the physical cheque in your hand to present it to the bank to access funds.
Banks usually validate the cheque to confirm its authenticity. They check the account details, examine for alterations, and check whether there is a lost or stolen report on the cheque.
The withdrawals made by the bearer cheque depend on the standard clearing and processing time of the bank.
Some banks also have a bearer cheque limit to minimize the risks, especially in the case of larger transactions.

One thing that you should keep in mind is that the requirements and bearer cheque withdrawal limit can vary for different banks. It also depends on many factors, like the type of account, specific policies of the bank, and your relationship with the bank. You should directly consult your bank about the exact rules for the bearer cheque withdrawals, as it can depend on the status of your account.

Difference Between Order and Bearer Cheque

There is a difference between the order and the bearer cheque. With the help of the bearer cheque, anyone having the cheque can encash it. It is a very easy and convenient process. In this case, the convenience comes with the help of the low level of security.

While the order cheque provides a high level of security for encashing the cheque. Only the person to whom the cheque is addressed can receive the payment for the cheque. However, it might not be a convenient process, but it ensures security. The payment is only made after the bank verifies the identity of the payee.

Bearer Cheque: Validity and Clearing Time

Here are the validity and the clearing time for the bearing cheque:

Validity: According to the guidelines of the Reserve Bank of India, the validity of the bearer cheque is three months. After this duration, the bearer cheque becomes invalid, and the bank will not accept it.
Clearing time: The clearing time for a bearer cheque depends on different banks' policies. Generally, it takes around 2 to 4 working days to clear the bearer cheque.

Advantages of a Bearer Cheque

The advantages are given below:

Anonymity: As the bearer cheque does not require the name of any particular payee. It maintains the privacy and enables anonymous transactions.
Quick Transfer: You can make speedy transfers with the bearer cheque from one person or business to another.
Flexible: These cheques can be used in business activities as they help in the settlement of short-term debts and also enable immediate payments.
Immediate Payment: It enables instant payments or transactions without the need for endorsements or identity proof.
Simple Process: It does not include any of the complex processes or verification steps, which makes it an easy way of making financial transactions.

Disadvantages of a Bearer Cheque

The disadvantages are given below:

Security Threats: There are many chances of fraud in the process of transferring funds by bearer cheques because it does not require any proof of identity or endorsement.
Regulatory Risk: Bearer cheque may face regulatory risk in some areas because of money laundering and the issues related to fraud.
Risk of Misuse: There is very little monitoring done on the bearer checks, which helps in facilitating illegal activities, such as money laundering.
Limited Acceptance: There are many businesses or organizations that do not allow or issue the bearer cheque because of the security issues related to them.