An order cheque is a type of cheque that requires the payee to endorse it before it can be cashed or deposited. This means the payee must sign the back of the cheque, indicating they have received the funds.
Features of an Order Cheque:
- Payable to: The cheque will clearly state "Pay to the order of [payee's name]," meaning the funds are specifically intended for that named individual or entity.
- Endorsement Required: The payee must sign the back of the cheque to transfer ownership and allow the bank to process the payment.
- Security Feature: Order cheques offer more security than bearer cheques, which can be cashed by anyone who holds them.
Practical Insights:
- Order cheques are commonly used for business transactions, as they provide a level of control and accountability.
- They are also used for personal transactions, especially when sending money to someone you don't know personally.
- If an order cheque is lost or stolen, the payee can prevent it from being cashed by reporting it to the bank and refusing to endorse it.
Examples:
- You purchase a product online and pay with an order cheque. The seller receives the cheque and can only cash it after you endorse it.
- You send an order cheque to your landlord for rent payment. They can only deposit the cheque after signing it.
