Because the cheque is not restricted to a specific payee, anyone can claim the funds if the cheque is lost or stolen. Therefore, it is important to exercise caution when issuing bearer cheques. Additionally, the cheque is valid for three months from the date of issue, providing a clear window for the payee to deposit it.
Cheques are a popular way of paying in India since they are secure and simple. Individuals are generally perplexed by numerous cheques, like crossing cheques, holder paycheques and ac payee cheques. For a more profound grasp, let us discuss below thorough details regarding account payee cheques, their purposes and how they vary from all other kinds of cheques. Account payee crossing is a particular type of cheque crossing that enhances security by restricting the payment to the payee’s account only. This is indicated by the “A/c Payee” written between two parallel lines drawn on the cheque. The primary benefit of account payee cheques is that they are the safest variant of cheques.
There are many different types of cheques you can issue based on the format in which you write them. An account payee cheque is often the best option for safe payments to a particular person or entity as it gives you full control. Cheques are referred to as crossed cheques when the A/C payee is not written between the lines placed at the corners of a cheque.
- When the cheque amount is debited from the drawer’s account and credited to the payee’s account, it creates a record that can be easily tracked.
- Account payee cheques are a valuable tool in the world of banking and financial transactions, offering an added layer of security and precision.
- In addition, it is customisable, allowing you to create different variations, such as special crossed cheques and non-negotiable cheques.
- Having explained the meaning of account payee cheque, let us assess its features.
- Some banks like Mashreq have introduced the Cheque Deposit Machine, which is similar to an ATM.
Why is an Account Payee Cheque Issued?
For example, a business may use an account payee cheque to pay an invoice or a bill. An individual may use an account payee cheque to pay rent or a mortgage. 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. 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.
- Account payee checks provide you with a safe way to handle your transactions.
- No, only the named payee can encash an account payee cheque, ensuring a secure transaction.
- Furthermore, there is no requirement of endorsing these cheques, and they may be quickly given to a 3rd party.
- One can mention “account payee”, and the words one must write on it are Account Payee or A/C payee.
A crossed cheque differs from an account payee cheque in terms of its properties. Regarding the signature, an account payee cheque differs from a crossover cheque and the order cheque, but it is opposed to holder verification. A holder cheque is perhaps the most prone to fraud, but an APC is a very safe document. It is essential to understand the various methods of drawing the line on cheques to fulfil the proper task. This is a type of cheque in which the bank deposits the amount directly into the payee’s account. Nevertheless, in this type of cheque, the payee can give the approval or authorisation for the third party, and further, the third person can recommend it to somebody else.
Types of Cheque
Instead, the payee has to credit the amount mentioned in the cheque directly in his bank account. 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.
On the top left corner of the cheque leaf, draw two parallel lines. Between these lines, write “Account Payee Only” or “A/C Payee Only”. This endorsement restricts the cheque from being encashed over the counter, ensuring that it can only be deposited into the account of the payee. This step is essential to convert a regular cheque into an account payee cheque, adding an extra layer of security to your transaction. The account payee cheque is a payment instrument that simplifies financial processes, adding an extra layer of security and accountability. By writing “account payee” or “A/C payee only” on the cheque, the person instructs the bank to transfer funds directly to the specified beneficiary’s bank account.
How to Deposit a Cheque in the Bank: Quick and Easy Steps
Additionally, these cheques can be quickly given to a third party and don’t a/c payee need any endorsement. To fill an account payee cheque, first enter all required information on the regular cheque, including the payee’s name, amount (in words and figures), date and your signature. Then, draw two parallel lines diagonally on the upper-left corner and write “Account Payee only” or “A/C Payee”.
So by mere crossing you are no longer making payment to PAYEE ONLY. 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. Once you have written the cheque, you record the same in the index section of the cheque book. You must write the name of the payee, date of cheque issuance, cheque number, and amount paid. Submit the endorsed cheque along with the completed deposit slip and your identification to the bank teller.
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. The drawer should always ensure they have sufficient funds to pay the amount specified in the cheque. Insufficient funds might cause the cheque to bounce, resulting in penalties and ruining the drawer’s financial status. Sign your name on the back of the cheque to endorse it for deposit into your account.
The words “Account Payee Only” or “A/C Payee Only” are written between two parallel lines at the top left corner of the cheque, indicating its restrictive nature. This makes it one of the safest types of cheque available, as it minimizes the chances of the cheque being misused or stolen. All you need to know about the meaning and usage of an account payee cheque. The drawee is the person or organisation to whom a cheque is made payable.
Scam Alert: RBI Deposit Plan with Rs.2,22,222 Is Fake!
Then, fill out the form and deposit it with the representative or drop the cheque in the cheque deposit box. Learn about the meaning of account payee cheques and how to use them in this article. His name will be mentioned on cheque, so he is an authorized person to receive cash. So if drawer himself need to withdraw cash from his account using cheque then he need to write as SELF in the payable field of the cheque.
With an account payee cheque, the drawer (the person who writes the cheque) instructs the drawee bank to only deposit the funds into the account of the named payee on the cheque. It provides an extra level of security since regular cheques do not have such restrictions. When you issue an account payee cheque, the payee must deposit it in their bank. The bank clears the cheque by transferring funds from your account to the payee account mentioned on your cheque.
Have you ever wondered what the term “A/C Payee Only” signifies when you come across it on a cheque? This seemingly small instruction actually carries significant implications for financial security. With DBS Bank app, you can open a new savings account in a few minutes! Learn the importance of your CRN/CIF number and how to find it with Kotak 811. Enhance your banking security and efficiency with this essential guide.
By restricting the cheque to a specific account, it minimizes the risk of fraud or theft. The named payee must fill out a deposit slip and deposit the cheque at their bank branch, ensuring that the funds are securely transferred. The definition of an account payee cheque revolves around its restrictive use. This adds an extra layer of security and ensures that the money reaches the intended recipient. 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.
An account payee cheque is a cheque drawn in favour of a payee’s bank account. When you issue such a cheque, the issuer must deposit it with their bank. The bank then clears the cheque within a few days and the funds are transferred from your account into that of the payee named on the cheque. It takes a bank around 1 to 4 working days to process an account payee cheque, after which the payee’s account will be credited with the funds. Usually, it takes around 2 business days to clear most cheques, but it can take longer, depending on the deposit size and the relationship with the bank.
Are you ready for an upgrade?
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. Cheques may take longer to clear depending on the amount, your relationship with the bank, or whether it’s a one-time deposit. When the money become accessible, you will receive a receipt from the teller or ATM.