How to avoid cheque bouncing in simple ways

Before we start with how to avoid cheque bounces in a simple way, let us understand a little about a chequebook and its uses.

What Is A Cheque?

A cheque is a negotiable instrument used to transfer funds or withdraw cash from the bank. A cheque enables you to negotiate any payments with another person.

Irrespective of the type of account, a savings bank or current account, chequebook can be used. When you pay somebody by cheque, you are the drawer of the cheque and to whom you are issuing it will be the payee.

So, having a cheque facility bank account, empowers you to order your bank to pay anybody in your favour.

For the service, the bank may charge you cheque requisition fee or a transaction charge.

In India, the rules and regulations of cheque payment are governed by NI Act 1881. Likewise, every country has its own regulatory authority that governs the payment of cheques.

The Meaning Of Bounced Cheque.

There are several reasons for cheque bounce. It may be due to post-dated instrument, the amount in words and figures differ, stele cheque, signature mismatch, torn cheque, or insufficient funds, and so on.

In most of the cases when we talk about cheque bounce, we are talking about cheque bounce due to insufficient funds.

Also, from a legal point of view, bouncing a cheque due to insufficient funds is regarded as a criminal offense and may result in a fine up to double the amount of the cheque or even imprisonment.

Let’s move on to how to avoid bouncing cheques. There are a few things one must know that would greatly lower the chances of getting a cheque bounced.

Avoidable Common Reasons

What is a Stale Cheque?

A stale cheque is a cheque with expired validity. As per the NI Act, a cheque is valid for 3 months.

Within this period, cheque has to be presented to the banker once it is drawn by the drawer. Otherwise, your cheque will bounce once its validity expires.

Understand Inchoate Cheque

It means an incomplete cheque. Before you submit it to your banker, you should verify whether everything is in order or not.

Check the payee’s name, whether the amount in words and figures is tallied or not, whether a signature is properly given or not, and whether the endorsement is required or not.

In fact, every detail should be double-checked to avoid payment rejection.

Check Account Balance

Verifying account balances is a good way to stay away from cheque bouncing.

The majority of the reasons behind cheque bounce are usually due to insufficient funds.

It would be wise if you could confirm the availability of funds in the account from the banker or from the cheque drawer.

What is a Post-Dated Cheques?

Some people used to draw cheques post-dated. That means a cheque written for a future date, to be paid on a specific date to a specific person or party.

If such a cheque is presented for payment before the due date, your bank will return it with the narration, “Since post-dated“.

Signature Mismatched

Not frequently, but occasionally, it happens. You see, the bank has every right to dishonour the check you presented if they cannot confirm the genuineness of the signature. 

Torn Cheques

If the cheque is torn, it becomes invalid. Such cheque leave should be marked damaged and destroyed. Never present torn cheque. If you receive one from someone, please ask for a new one instead,

Overwritten Cheques

An overwritten cheque is not a valid instrument. Even the drawer can not be authenticated with his signature. One should draw the cheque in a neat manner. Should write the payee’s name, the amount in words and figures, and the date in neatly legible handwriting.

Inoperative or Dormant Account

This is also another reason for your cheque being bounced. So make sure the account is not inoperative or dormant.

Accounts become inoperative or dormant if there have been no transactions in the last 2 years. If you could know when was the last transaction done in the account, that would be sufficient for presenting

Cheque Put On Stop Payment By Drawer

Due to unavoidable circumstances, the cheque drawer can request his bank to stop the payment of the cheque. It may be for various reasons, like fraud, lost chequebook, etc.

In this case, usually, the drawer informs the payee about the stoppage of the cheque payment. Normally, it settles between the drawer and the payee on mutual consensus.

Use Online Payment

The best way to avoid cheque bouncing is to accept online payments.  The transaction happens instantly, too.

This online payment is done through Internet banking, mobile banking, UPI payment, etc. Moreover, there are so many other applications, such as PhonePe, Google Pay, PayTM, etc that can be used by everyone.

Cheque Bounce- A Criminal Offense.

Under Section 198 of the NI Act 1881, bouncing a cheque due to insufficient funds is a criminal offence. After repeated reminders, if the bouncing of cheques still happens, a person may get fined up to double the amount of cheques or may even get imprisoned for 2 or more years.

You see, it is quite simple to avoid your cheque getting bounced. Follow these simple rules, and your cheque will never get bounced. 

Yes, there is a certain case that is not in your hands. For instance, if the drawer’s signature is mismatched, there is no way you can get your cheque honoured. 

Technical problem with the account, account being put on hold due to legal actions against the cheque drawer, account being put on hold due to loan overdue. These are some of the cases where a cheque getting bounced is imminent. 

So, try using more online banking transactions rather than using a chequebook. If you want to transfer funds or receive them, start relying on online platforms. 

It will save you time as well as money, as online transactions are far cheaper than using cheques.