Ten (10) Types of Cheques in Nigeria

Cheques are negotiable instruments written by a drawee instructing the drawer to pay a certain sum of money to the named person (payee) on the cheque. They are used only in commercial banks. Cheques are a form of money. A holder of this instrument is said to hold money as it were. In Nigeria, only the central bank is allowed to produce and print this form of money. Below, we discussed ten types of cheques in Nigeria.

1. Open cheque

Cheques are open if they are blanked. That is, the payee's name is not written on it by the owner or drawee of the cheque. In an open cheque, anybody whose name is written as the payee can encash it. Therefore, if Mr. A is the drawee, he can give the cheque slip to Mr. B who is the first payee. And Mr B can decide to give the cheque to Mr. C to cash the money. The disadvantage of an open cheque is that if the slip is misplaced, any person who has a hold on it can withdraw the money without any consequence.

2. Crossed cheque

A crossed cheque is the opposite of an open one. When a cheque is crossed with two parallel lines, the drawee can specify how the payment will be made. He or she can direct that the cheque should be used to credit the bank account of the payee (a/c payee only) or specify that the cheque can only be withdrawn from a particular bank.

3. Order cheque

An order cheque is the most common form of cheque bank staff encounter daily in Nigeria. Here, the drawee writes the name of the payee on the cheque. This implies that only the payee can cash the cheque from the bank. However, banks usually ask for a means of identification such as a driver's license, passport, or national identification number (NIN) card as proof that the name written on the cheque is the same person withdrawing the money on it. 

4. Bearer cheque

The bearer cheque is similar to an order cheque. However, the phrase “or bearer” is usually attached to the face of the cheque. Therefore, the bank may not necessarily need a means of identification to verify the name written on it. 

5. Traveler's cheque

Before the innovation of electronic bank transfer, debit and credit cards, and mobile banking, travelers' cheques were used by foreigners moving to other countries for vacation or work. The cheque has no expiring date and can be used to withdraw money from a bank in a foreign country. Usually, the bank in the home country of the traveler has a collaboration with another bank in the foreign country. 

6. Post-dated cheque

This type of cheque has a future date written on it. The payee cannot withdraw the sum of money on it before the date written on the post-dated cheque. So, if the payee decides to encash it before the date, the bank will not process the cheque until the date written on it.

7. Dishonored cheque

Dishonored cheques are cheques that the bank refuses to endorse for payment. There are several reasons why a bank may dishonor a cheque. One of the primary reasons is insufficient funds in the bank account of the drawee. In this case, the bank will bounce the cheque and may charge a penalty for it. In Nigeria, this will attract a sum of 5,000 Naira.

8. Stale cheque

Stale cheques are types of cheques that are more than three months old. If this form of cheque is presented, the bank will dishonor it. The payee will need to bring a new cheque with a current date on it 

9. Self cheque

Self cheque withdrawn by the drawee. In this case, the drawer is also the payee. Normally, the word self is written on it. Which shows that it is the printed name on the cheque that is withdrawing the money.

10. Bankers cheque 

It is a non-negotiable instrument issued by the bank instead of the drawee. Here, the bank will use the cheque to settle debts on behalf of the account holder. A banker’s cheque cannot be withdrawn if the cheque is more than three months old. However, it can be redirected to the drawee.