Account Payee Cheque and Crossed Cheque Difference

What is an Account Payee Cheque (A/c Payee)? Under what circumstances or instances do we write an Account Payee Cheque (A/c Payee)?  What is the right way of writing an Account Payee Cheque?

I am sure everyone knows how to write an A/c Payee Cheque, but do you know the difference between a Crossed Cheque (//) and an Account Payee Cheque?

We generally write a Crossed Cheque or an A/c Payee on the cheque leaf to mean the same thing, but there is a difference between the two.

Let’s read more to find out the difference between the two –

Account Payee Cheque (A/c Payee)

Account Payee Cheque, also commonly written as A/c Payee is issued when you want to redirect the amount to a specific person or entity.  This means that the person/entity, whose name has been written on the cheque, can only transfer this money to their account and the money cannot be given in cash at the branch.

Crossed Cheque Meaning

What does crossing a cheque mean?

Crossed Cheque is issued when we make two parallel lines on the top left corner of the cheque leaf.  In this case also, the money will be directed to the account of the person mentioned in the cheque.

But the primary and the most important difference between an A/c Payee and a Crossed Cheque is that unlike an A/c Payee, a Crossed Cheque can be endorsed.

Account Payee Cheque Withdrawal/Cashing

What do we mean by the endorsement of a Crossed Cheque?

Suppose, there are 3 people involved in a transaction – Ajay, Sanjay and Vijay. Ajay needs to give Rs. 2 Lakh to Sanjay and in turn, Sanjay needs to give Rs. 2 Lakh to Vijay. Ajay presents a cheque of Rs. 2 Lakh to Sanjay drawing 2 parallel lines on the top left corner of the cheque. Sanjay does not want to put the money in his account and directly wants to give it to Vijay. Can he do it?

Yes, Sanjay can do so because Ajay had issued him a crossed cheque.  The only thing that Sanjay needs to do now is to endorse the cheque and he can do so by merely putting an endorsement on the back of the cheque i.e. by putting the name and account number of Vijay along with his signature.  Sanjay can then re-issue the same cheque to Vijay.  This is called an endorsement.

If the cheque is credited to Vijay’s account, it is called cheque honoured. If for some reason the cheque is not cleared, it is called cheque dishonoured.

In this case, if the cheque gets dishonoured, Vijay can file a case against Sanjay and Sanjay can in turn file a case against Ajay.

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Account Payee Cheque (A/c Payee Cheque)

Account Payee Cheque is when we make two parallel lines on the top left corner of the cheque leaf and write the word A/c Payee in between the two parallel lines. This will be considered as an Account Payee Cheque (A/c Payee Cheque).  In such cases, the money will be credited to the account of the person/entity in whose favour the cheque was issued.  You will not be able to endorse this cheque like a Crossed Cheque. Let’s look at the above example itself.  If Ajay had written the name of Sanjay in the Crossed Cheque that he had drawn in favour of Sanjay, he could not have endorsed the cheque to Vijay. The money would have only been credited to Sanjay’s account.

A/c Payee Cheque in SBI- Cheque Collection Policy

Why and how do we write Account Payee Cheque(A/c payee only)?

The most appropriate way to write an Account Payee Cheque is by writing the word “Account Payee” or “A/c Payee” in between the parallel lines. Some people write it on top of the parallel lines.  Though this is not the appropriate format, most banks accept the cheque issued in this format too.

Fun Fact – Did you know that there is a legal definition for the term “Account Payee”?  This term is the brainchild of banking practices and also is now accepted legally across the country.

Account Payee Cheque is written to minimise the chances of fraud. The amount will be credited only to the bank account of the payee and cannot be encashed in the bank directly.

Banking terminologies that one must be aware of as part of the cheque issuance process are Drawer, Drawee, and Payee. It is useful to know these terms in order to understand the complete definition of Account Payee Cheque:

• Drawer – The person who writes or issues the cheque is called the Drawer. This person holds an account in the bank and writes the cheque on the same account. A cheque acts as a direction to the bank to release the amount specified in the cheque to the person whose name is written on the cheque.
• Drawee – An intermediary who facilitates transactions is called a Drawee. In our day-to-day lives, our banks usually act as an intermediary or a facilitator to channelise the payments that the Drawer has issued.
• Payee – The person to whom the final payment is made is called the Payee. The person whose name has been written on the cheque is payee if it’s an A/c Payee Cheque. Crossed Cheque can be further endorsed and payee can be the person to whom the cheque was endorsed.

What happens when Drawee and Payee are the same people?

It is called as Self Cheque i.e the person himself is going to bank and withdrawing money from his own account.

Is there any difference between the Account Payee Cheque or Crossed Cheque of SBI or ICICI or any other private bank?

No, there is no difference between the two because all banks accept the same format.

Did you know the difference between Crossed Cheque and Account Payee Cheque (A/c Payee Cheque)? Pls share your views.