Account Payee

A Payee Account is an account or accounts in the name of the Payee (whether maintained with the Bank or by another financial institution recognised by the Bank for such purposes of the Services, or a subset of them) to which the Customer may transfer funds by debiting an Originating Account. The Payee Account also is referred to as the ‘payee account’ or the ‘pay to’ account. An account  Payee Cheque is a highly secure type of cheque because the amount can only be deposited into the payee’s account. The payee is not permitted to endorse this cheque to anyone else. To better understand the concept, one must first distinguish between a drawer, a drawee, and a payee.

Understanding Payee

A payee is a party who receives payment in exchange for goods or services. A payer pays the payee in cash, check, or another transfer medium. In exchange, the payer receives goods or services. The bill of exchange includes the payee’s name, which usually refers to a normal individual or an entity such as a business, trust, or custodian. There will always be a party that provides the goods or services and a party that receives the goods or services in any type of transaction. To receive goods or services, a payer must exchange value, which is usually money, with the payee.

In a banking situation, the payee should have an active, in good standing account through which funds can be transferred by the payer. Of course, this is only applicable if the transaction is not made in cash. The party receiving the payment is known as the payee in the case of a promissory note, wherein one party promises to pay another party a predefined sum. The payer is the person or entity who makes the payment. In the case of bond coupon payments, the party receiving the coupon is referred to as the payee, while the bond issuer is referred to as the payer.

Account Payee Cheque

An Account Payee Cheque is a highly secure type of cheque because the amount can only be deposited into the payee’s account. The payee is not permitted to endorse this cheque to anyone else. To better understand the concept, one must first distinguish between a drawer, a drawee, and a payee. A drawer is a person who writes and signs a cheque; typically, this is the person who owns the account from which the funds will be deducted or is an authorized signatory for that account.

The drawee is the person or entity to whom the cheque is written. The bank is usually the drawee, and the drawer instructs the bank to draw the amount. A payee is the person or entity to whom the final payment is made, and his/her/its name appears on the cheque. As a result, in the case of an account payee cheque, payment shall be done only by depositing it into the payee’s account.

Steps to write Account Payee Cheque

To write an account payee cheque, cross two lines just on the left corner of the cheque and write “Account Payee” between them.

Remember that if you simply cross the cheque without writing “Account Payee,” it will be a crossed cheque rather than an account payee cheque.

A crossed cheque differs from an account payee cheque in several ways. As a result, the former should not be confused with the latter.

The main reason for the popularity of writing an account payee cheque is that it is the safest type of cheque.

• Because the sum will only be paid by depositing it into the payee’s account, there is little chance of it being misappropriated.
• Furthermore, the payee cannot endorse the cheque to anyone else, which adds to the security of these cheques.
• Another thing to keep in mind about account payee cheques is that they are only valid for three months.

Conclusion

A payee is a party who receives payment in a transaction involving goods and services. The payee provides products and services to the payer, who acquires them through a value exchange (most often money). Payees can also be more than one party in a transaction, and they can be the same party at times. If the Social Security Administration believes the beneficiary cannot be trusted or is incapable of managing their own funds, it may appoint a representative payee. Cheques are a popular method of payment in India because they are secure and simple. People are frequently perplexed by different types of cheques, such as crossed cheques, bearer cheques, and account payee cheques.