Everything You Need to Know About Account Payee Cheques
In both cases, the cheque can only be deposited into the account of the person or entity that the cheque is made out to, providing added security and peace of mind. Therefore, an account payee check is fundamentally different https://1investing.in/ from a bearer cheque and different from crossed and order cheques in terms of endorsement. In addition, an account payee cheque is a highly secure instrument, whereas a bearer cheque is the most prone to misuse.
A payee is a party in an exchange of goods or services who receives payment. The payee is paid by cash, check, or another transfer medium by a payer. The name of the payee is included in the bill of exchange and it usually refers to a natural person or an entity such as a business, trust, or custodian.
- The Social Security Administration (SSA) may designate a representative payee if it believes the beneficiary can’t manage funds on their own.
- If you are depositing an issued cheque in your account, you must write your name, account number and phone number on the flip side of the cheque.
- 2) Drawee-Drawee is a party upon whom the cheque is written.
- Within some days, the bank will transfer the money to your account.
- And, most banks have started to charge for extra cheques you order.
Typically, the banks are the drawee and are given instructions by the drawers to withdraw the funds. The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned.
Definition and Examples of a Payee
So by mere crossing you are no longer making payment to PAYEE ONLY. The payee can further endorse or cash it according to his wish. Also in case of dishonor of cheque (in the above example), Mr.Rohan can sue Mr.Satish and in return Mr.Satish to me and finally I can sue to the drawer of cheque. The payee can be described as the account holder or the corporate entity to whom you are transferring money. It is two parallel lines on the upper-left edge of a basic cheque.
However, you may only do so with the money in your accounts. The definition of an account payee cheque is discussed above. Below are the definitions for other different kinds of cheques. In case of a crossed cheque, the payee is free to make further endorsements. This crossed cheque is no more a bearer cheque where anyone can negotiate and get payment across the counter.
Second, it ensures that the funds are paid to the intended recipient. Third, it can be used to make payments to people who do not have a bank account. If you are issuing an account payee cheque, you must draw two parallel lines on the top left corner of the cheque leaf and add the words "Account Payee Only" or "A/C Payee Only" between the lines. You must write the intended payee’s name, the payment amount (in words and figures), the date of issue, and sign the cheque. In the case of account payee cheques, the phrase “account payee” or “A/C payee” is typically written between the two parallel lines that mark the crossing. This indicates that the funds should only be credited to the bank account of the payee, making the cheque non-negotiable.
Private Banks
If a representative payee takes advantage of their position, the Social Security Administration should be notified immediately. You may need to provide additional details, like your address or account number, so that the utility company can apply the payment to your account. This also means even a small mistake on your cheque will result in your cheque not getting cleared. And, most banks have started to charge for extra cheques you order.
That person can negotiate the check, but they must manage money for the benefit of the actual beneficiary. As a result, the funds must be spent on (or saved for) things that help the beneficiary. It's illegal for a representative payee to enrich themselves with these funds. After endorsing a check, the payee presents it to a bank or credit union for deposit.
Three Important Terms Associated with Account Payee Cheques
Payee - Party to whom a bill of exchange (such as a check or draft) is made payable. Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting. Urban Money is India’s one of the unbiased loan advisor for best deals in loans and unmatched advisory services.
The cheque book allows you to pay different people, entities, service providers, etc., what you owe them. While most of us have adapted to the digital age, where we conduct online transactions, account payee cheques still remain relevant and are used widely. Let us learn more about these vital banking instruments, its features and what it entails. This type of cheque is different from a regular, or "open," cheque, which can be cashed by anyone who holds it. The amount written on the cheque will be paid only to the person whose name is written on it. The biggest advantage of this is that in case of loss of cheque, a fraudster cannot take the cash in return by pretending to be the target person.
Generally, the drawer is the individual whose account is debited. One can mention " account payee " between the two lines on the upper left side of the cheque. One can mention "account payee", and the words one must write on it are Account Payee or A/C payee.
New cheque norms: Know how to write the cheques correctly
Embracing the benefits of account payee cheques contributes to a safer and more reliable payment ecosystem. If you ever receive an account payee cheque, it is not possible for you to cash it instantly. To encash it, you are required to deposit the cheque into your Savings Account by filling out the cheque deposit form.
It also decreases the chances of misuse of the cheque as the amount will be paid to the account of the payee only. From above image, you notice how to change the normal cheque leaf into crossed cheque. Once you cross the cheque and mention the payee name (in above example, it is my name) then I can only encash this cheque by depositing to my Bank Account. However, do remember that in crossed cheque payee is free to make a further endorsement. Instead of cashing it to my bank account I can further endorse the cheque to anyone, for example to Mr. Satish by writing and signing on back of cheque leaf. Further Mr.Satish either can encash this cheque or he can endorse to someone, for example to Mr.Rohan by writing and signing on back of cheque leaf.
It is important to double-check the name, amount, and date before signing the cheque, as any errors may cause the cheque to be returned or delay the process of funds transfer. Additionally, it is advisable to use a pen with blue or black ink, as it is easier to read and less likely to be altered. By following these a/c payee simple steps, you can be sure that your account payee cheque will be processed safely and efficiently. Keep in mind that if you merely cross a cheque without “Account Payee” written on it, it will not be an account payee cheque. A crossed cheque differs from an account payee cheque in terms of its properties.
The deducted amount is paid out to the recipient's account upon encashment. 1) Drawer-He is a person who holds the account and has written and signing authority on cheque. He is directing banks to pay a certain amount of money to the certain person or to the bearer of the cheque. Therefore, in simple words, you may say that a person who holds the bank account and who sign on cheque is called the drawer. All cheques are bearer cheques unless the word bearer is crossed or another form of crossing is made on the cheque.
Designed to safeguard against fraud and unauthorised use, these cheques can only be deposited into the specified payee's account, providing peace of mind for both parties involved. The payee is a person or entity to whom the cheque is addressed. For example, if you write an account payee cheque to your landlord for rent, your landlord is the payee. When you open a Bank Account, your bank provides you a cheque book, which you can use to issue cheques to different payees.
Such cheques can be cashed by the person holding them over the counter. Additionally, these cheques can be quickly given to a third party and don’t need any endorsement. An account payee cheque is issued to eliminate any chances of misappropriation. The fact that the payee is unable to sign these cheques to somebody else adds to the layer of security.