Account Payee Cheque : What is it & How to Write Detailed Guide

Ensure the money goes to the right personThe importance of this rule lies in preventing others from misusing your cheque and diverting the funds to a different account. Yes, there are a few circumstances where an account payee cheque can be converted into cash. For example, if the payee is the holder of a power of attorney for the account holder or if the payee is the executor of the estate of the account holder. In these cases, the bank will require the payee to provide documentation to support their claim. The drawee is the financial institution to which you are writing the cheque.

Additionally, these cheques can be quickly given to a third party and don’t need any endorsement. In fact, it is one of the added security measures that help prevent fraud or misuse of the cheque. When the drawee writes a cheque to the payee, the amount mentioned on the cheque will be debited from the former’s account to the payee’s account after the cheque is realised. The amount is debited from the drawer’s account and encashed into the recipient’s account. For example, if you write a cheque and mention your friend’s name as the account payee, you are the drawer. By following these steps, you ensure that the cheque can only be deposited into the payee’s bank account and cannot be endorsed to another party.

STEP 3: Cross the cheque with two parallel lines.

Write “Account Payee” between the parallel lines to further specify that only the payee can deposit the cheque. It is two parallel lines on the upper-left edge of a basic cheque. An order cheque has the term ‘Bearer’ crossed out and the word ‘to Order’. This form of the cheque has comparable properties to a bearer cheque, but one cannot endorse it simply by giving it over to somebody else. Before proceeding further, first let us understand the parties involved in cheque transactions.

Personal Loan – Quick help anytime!

An account payee cheque is a secure cheque issued in favor of a specific payee’s bank account. It can only be deposited into the payee’s account and cannot be cashed over the counter. The cheque ensures that funds are directly transferred to the intended recipient, preventing unauthorized cashing. Marking a cheque as “account payee” guarantees that the amount will only be credited to the payee’s bank account, enhancing security in financial transactions. The primary advantage is its security; since the cheque is addressed to a specific person or entity, it ensures that only the named payee can deposit the funds into their account.

What Is the Significance of an Account Payee Cheque?

However, when it comes to filling or writing a cheque, there are some do’s and don’ts to keep in a/c payee mind. This guide aims to explain the many nuances of cheques, covering everything from understanding what a cheque is to the various types and how to fill a cheque. Therefore, in an account payee cheque, the bank only transfers funds into the payee’s accounts to complete the payment. Before issuing an account payee cheque to the payee, make sure to cross two parallel lines on the top left corner of the cheque and write “Account payee cheque” between two lines.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. After opening a bank account, you will be provided with a kit in an envelope.

1. An account payee cheque has several features that make it a secure method of payment.
2. This seemingly small instruction actually carries significant implications for financial security.
3. Ensure the money goes to the right personThe importance of this rule lies in preventing others from misusing your cheque and diverting the funds to a different account.
4. Moreover, if the drawer’s account from which the funds are to be drawn has insufficient funds, the cheque will bounce.

Terms associated with account payee cheques

If convenient, you can also use a stamp with the same wording, ensuring that the imprint is clear and legible for banks to recognize the instruction. Having explained the meaning of account payee cheque, let us assess its features. The drawer is the entity or the account holder who is writing the cheque and signs on the cheque. Generally, the drawer is the individual whose account is debited. If you are new to the world of banking, it is rather usual  to come across the term ‘account payee or a/c payee cheque’ and not quite understand what do they actually mean.

Whether you need to clear your credit card bills or pay your loan EMIs, you can use this type of cheque. When you write an account payee cheque, you are instructing your bank to withdraw funds from your account. The deducted amount is paid out to the recipient’s account upon encashment. This marking signifies the cheque cannot be cashed at a bank counter but must be deposited into a bank account, ensuring a secure transaction to the payee’s account only.