What is dishonour of cheque?

So, a few days ago, I learned about the term dishonour of cheque. I didn’t know what it meant, and to learn about this, I started doing some research. I learned that dishonour of cheque meaning refers to a situation where the cheque issuer's bank refuses to honour the payment. This generally happens when there are insufficient funds, signature mismatches, or other discrepancies. I also learned that this could have a bad impact on a business loan. 

What Does Dishonour of Cheque Means?

As I mentioned above, dishonoured cheques refer to a situation where the issuer's bank does not accept a cheque. This could have some serious impact on the business loan. I have listed a few below. 

Legal Consequences

Dishonoured cheques have quite a lot of legal consequences, which will affect the loan eligibility of a business. In some cases, it can also be considered as a criminal offence and legal actions such as fines and imprisonment can be imposed. 

Credit Score Impact

These cheques badly impact the credit score of a business. This will hinder the business from availing loans or credit from various institutions. 

Damage to Credibility

Most businesses run on trust and credibility. Giving someone a dishonoured cheque will damage the credibility of the business very badly. 

And that’s about it. I hope this answers your query. 

Hey,

Before I started using the digital mode of payment, I used to transfer funds using cheques. So, I can tell you what is dishonour of cheque. A cheque is said to be dishonoured when a payee fails to deposit the cheque of the payer successfully. A payer is someone who issues a cheque to the payee while the payee is the one who deposits this cheque in the bank. The cheque is dishonoured if the bank refuses to pay the amount specified on the cheque.

The payee should inform the payer about the dishonoured cheque and ask them about the reason for the same. If the payer thinks the cheque will be honoured again, they can resubmit it within 3 months after the date mentioned on it. However, the payer can face legal action if the cheque bounces again.

Reasons Why Cheques Get Dishonoured

Not having enough money in the account is a very common reason for dishonoured cheques. The bank can’t process the transaction if you don’t have enough money in your account.

Overwriting anything on a cheque can become the cause of rejection. The bank will reject it because it looks suspicious.

The bank won’t accept any cheque in poor, ripped, or damaged condition. They also reject cheques if there are a lot of stains on them or if the details are unclear, so keep them in a readable condition.

Cheques are among the few methods of payment that still rely on signatures. If the signature of the payer doesn’t match the recorded signature with the bank, the cheque will get rejected by the bank.

Any fault or discrepancy with the date can result in disapproved or dishonoured cheques.

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I hope you liked my answer on what is dishonour of cheque.