What is an Account Payee Cheque and What is Its Importance?
An Account Payee Cheque is a secure mode of payment. The cheque will have the Payee’s name and would only be paid to them. If you are required to pay an amount to a Payee through an Account Payee Cheque, you must learn how to write and deposit it. On the other hand if you are the Payee, you must know how to encash it. This article walks you through all the aspects of an Account Payee Cheque. Read on to get all the details!
What is an Account Payee Cheque?
The Account Payee Cheque is a very secure mode of payment. It is only used to deposit money into the accounts of the payee, and the recipient is not allowed to mark the cheque for anybody else. To get a better understanding, know about the following three terms:
Drawer: A drawer is the one who signs the cheque and does his signature on it. Typically, they are the people whose account the recipient withdraws money from, demonstrating their authority.
Drawee: The drawee is the person or organisation to whom a cheque is made payable. Typically, the banks are the drawee and are given instructions by the drawers to withdraw the funds.
Payee: A payee is an organisation or person to whom you make the payment. Their name is printed on the cheques.
Therefore, in an account payee cheque, the bank only transfers funds into the payee’s accounts to complete the payment.
How to Write a Cheque for an Account Payee?
To write an account payee cheque, follow the steps below:
- On the left corner, you should draw two diagonal lines. Write “Account Payee” in between the diagonal lines.
- Write the date, amount, name of the recipient, and your signature.
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. Consequently, it is crucial to distinguish between the two.
Also Read: Unsecured Loans In India: Different Types Of Unsecured Loans Available
Importance of an Account Payee Cheque
Writing “account payee cheque” is common mostly because it is considered the safest cheque type. The amount will directly get deposited into the recipient’s account. The fact that the payee cannot endorse the cheque to some other party merely adds to its security. Account payee cheques have a three-month validity period.
How is a Cheque of Account Payee Different from Other Cheques?
An account payee cheque’s definition has previously been given. The definitions of more sorts of cheques are provided below:
Crossed cheque- It is one whose proceeds can be deposited only into the account of the payee. However, the payee of such cheques may endorse it to a third party; the third party may then endorse it to a further party. The endorsee’s name can be written on the cheque, and their signature can be seen on the back of the cheque leaf.
Bearer cheque- All cheques are bearer cheques unless the word bearer is crossed or another form of crossing is made on the cheque. Such cheques can be cashed by the person holding them over the counter. This form of cheque is particularly insecure and can be misused when lost. Additionally, these cheques can be quickly given to a third party and don’t need any endorsement.
Order Cheque- An order cheque is the one that has the words “to Order” printed on it and the words “Bearer” crossed out. Although this form of the cheque has properties similar to bearer cheques, it can’t be endorsed by simply giving it to another person. It must be properly endorsed and signed to be accepted.
Therefore, an account payee check is fundamentally different 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.
How to Deposit or Encash an Account Payee Cheque?
You must use the cheque deposit form to deposit it into your savings account. Follow these steps next:
- Fill out the entire cheque deposit form
- Attach it with the cheque and give it to the customer service representative or put it in the deposit box for cheques
- The bank will deposit the funds into your account in a few days
Note: The contact information and savings account information must be written on the back side of the cheque. Even if the deposit form is incorrect, the bank will still deposit the money into the correct account.
Most cheques take three business days to clear. Depending on the size, your relationship with the bank, or whether it’s a one-time deposit, cheques might take longer to clear. The teller or ATM will issue you a receipt as soon as the funds are available.
How to Apply for a New Cheque Book?
There are 3 ways through which you can apply for a new cheque book:
1. Via ATM: This is one of the easiest ways to apply for a new cheque book. The steps for this are:
- Step 1: Visit the ATM of your bank and insert your debit card.
- Step 2: After entering your card’s PIN, select the option on the screen to issue a new cheque book.
- Step 3: Submit your request and wait for your new cheque book to be delivered to your home address.
2. Via Internet Banking: Internet Banking is another easy way to request a new cheque book. You have to follow the following steps to do this:
- Step 1: Log in to your bank account via internet banking.
- Step 2: Click on the option to request a new cheque book.
- Step 3: Mention details such as account number, mailing address, etc., and wait for your new cheque book to arrive.
3. Via the Mobile App: This method is very simple. All you have to do is open the mobile app and log in to your bank account to apply for the new cheque book.
Also Read: What Is A Cheque? Know Its Features, Benefits And Types
Final Word
Account payee cheques are secure and convenient and are a common payment method in India. However, people frequently misunderstand the differences between several types of cheques, including crossed cheques, bearer cheques, and account payee cheques. Now that you know what an account payee cheque is, and how to write and encash one, you will be able to add an additional layer of security while making and receiving payments through account payee cheques.
FAQs
Ans: A cheque can be defined as a document you can issue to your bank, ordering a payment to a payee specified on it. The amount which you want to pay is also to be mentioned on the cheque.
Ans: Account Payee Cheques are a highly secured payment method. The recipient cannot mark the cheque for anyone else. He or she is the only person who can encash the account payee cheque and receive the amount into his/her bank account.
Ans: The account payee line appears on the top left corner of the cheque. It consists of two diagonal lines and “Account Payee” written.
Ans: Unlike regular bearer cheques, where the recipient can endorse them to a third party, an Account Payee Cheque cannot be endorsed. Only the payee can get the amount credited to their account.
Ans: When the cheque is from the same bank as yours, it usually gets passed within the same day. However, if it’s from a different bank, it usually takes 3 business days to clear.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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