A cheque is a simple instruction to a bank to pay a certain amount of money to the person named on the cheque or person at which the cheque was issued to.
Read More On Cheque Before Using It As A Means Of Payment
There are several disadvantages and advantages you should consider before using cheque as a method of payment for goods and services. Below are some of the merits and demerits of using cheques as means of payment.
Advantages Of Cheque
Cheque saves the inconvenience of carrying about large sums of money.
It reduces exercise of counting huge sum of money by using single cheque lead to pay amount of money.
Cheque serves as a receipt for the money sent. Once it is honoured by the bank it becomes a proof that money has been paid or recieved.
A cheque that a drawer issues to another person is not debited against his account until the cheque has been presented to his bank by the payee.
As it actually has advantages attached to it, so likewise it has disadvantages.
Disadvantages Of Cheque
There is high risk in such method of payment transaction, unless certain precautions are taken, if a bearer cheques gets into the wrong hands, this is the hands of someone other than the person for whom it was intended, it may be cashed out and the money will be lost.
Sometimes there is more or less cost of operation as customers pay for both check leaves and payments made on each of them.
It is unacceptable by the public to pay small sum of money by cheque.
Sometimes there are delay before payments made by cheque is recieved or cashed.
People who operate current account sometimes find it difficult to accept cheques.
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Furthermore, a problem faced by cheque payment method is that someone can steal a cheque written for another person and succeed in cashing the money over the counter of a bank, well in order to minimize this problem, a cheque may be crossed and additional instructions may be given to the bank on how to honour the cheque.
There are other several special crossing or additional instructions that reduces
Special Cheque Crossing Instructions
Account Payee Only implies that the cheque must be paid into the account of the person whose name appears on the cheque.
Not Negotiable indicates that the cheque may not be transfered to another person.
Limited Summeans incase figure is altered,the bank should question it and consult the person who issued the cheque.
Most times the use of personal cheques is not possible or easy, because the payee may delay or even refuse to accept them. So there are several special means of making payment through the bank, they are;
Bank Draft: A cheque which a bank withdraws on the bank’s deposits in another bank is known as bank draft. Banks do sell drafts to anyone whether the person is their current account customer or not. Bank drafts are safe means of transfering money from one place to another.
Cashier Cheque: This is a cheque which a bank draws on its own funds. Sometimes if a customer has no choice between a cashier’s cheque and a bank draft, the bank will advise him depending on where the payment(s) is to be made. But, they also sell such cheques to customers just as they sell bank draft’s.
Traveller’s Cheque: Banks provides travellers a means of carrying money about in a way that is more convenient than bank drafts and cashier cheques. Travellers cheques are mostly accepted by several institution of the business community.
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