An 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. Read on to know the various terms associated with account payee cheque, why it is issued, how to write, deposit and encash it and how it is different from other cheques.
Terms Associated with Account Payee Cheque
To get a better understanding, know about the following three terms:
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.
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.
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.
Why is an Account Payee Cheque Issued?
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. Moreover, these cheques are valid for three months only. But, you need to be careful about one thing–you cannot overwrite anywhere on such cheques.
Given below are two important points about why these cheques are issued apart from security reasons:
- The money will go to the payee’s bank account only.
- The payee will not be able to withdraw cash over the counter.
How to Write an Account Payee Cheque?
- On the left corner, draw two diagonal lines and 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.
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.
Account Payee Cheque Clearance
Enumerated below is the account payee cheque clearance process:
- First, the payee visits the bank and deposits the cheque
- The bank will start the process of clearing the cheque by sending a request to the drawer’s bank for payment. The payee’s bank also sends a scanned image of the cheque to the drawer’s bank
- The drawer’s bank will minutely assess the details such as signatures and start the processing of payment. The money will be paid if the drawer has sufficient funds in the account
- Then, the payee’s bank will complete the payment processing and credit the amount to his/her 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 is an Account Payee Cheque Different From Other Cheques?
An account payee cheque’s definition has previously been given. The definitions of more sorts of cheques are provided below:
1. 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.
2. 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 cheque could be misused when lost. Additionally, these cheques can be quickly given to a third party and don’t need any endorsement.
3. Order Cheque
An order cheque is one that has the words “to Order” printed on it and the words “Bearer” crossed out. Although this form of 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.
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.
Q1. What do you understand by a cheque?
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.
Q2. How do account payee cheques work?
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.
Q3. Where does the account payee line appear on a cheque?
Ans: The account payee line appears on the top left corner of the cheque. It consists of two diagonal lines and “Account Payee” written.
Q4. Is it feasible to endorse an account payee cheque?
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.
Q5. For a cheque to pass, how much time does it take?
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.
Q6. Who is the payee in a cheque?
Ans: The payee is a person who receives a particular amount from the bank. In other words, it is the individual or entity to whom the payment has been made. The payee’s name appears on the cheque.