Cheque can be defined as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
1. Bearer cheque – Bearer cheque is defined as the cheque which is payable to the person who presents it to the bank for encashment
2. Order cheque – Order cheque can be defined as the cheque which is payable only to the person who is named in cheque or to his or her endorsee (One to whom ownership of a negotiable document is transferred by endorsement.)
Apart from above it is important to talk about two other terms called postdated and stale cheques because they also tend to be part of day to day banking operations.
Postdated cheques – Postdated cheque is one which is written by the maker to pay on a future date. For example while buying a car if buyer has to pay the amount of car in 24 months then he can issue 24 cheques for the next 24 months to the supplier of the car and these are called postdated cheques.
Stale cheques – Stale cheque refers to those cheques which are presented to the bank after 6 months from the date of its original issue. For example if cheque of 1 January 2009 is presented on 1 August 2009 it will be treated as stale cheque and no payment will be made on it.