What Is a Payee?

Definition & Examples of a Payee

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A payee is a person or organization that receives payment for goods or services.

Learn more about payees and how they work.

What Is a Payee?

Payees receive funds from a payer. Payment can be in any form, including cash, a check, a money order, or an electronic transfer of funds. Payees can be friends you pay through Venmo, service providers you pay for insurance and utilities, merchants, or anyone else you need to pay.

  • Alternate definition: A person who receives and manages Social Security or Supplemental Security Income (SSI) payments on behalf of a person who is incapacitated is a representative payee.

How a Payee Works

You typically encounter payees when banking. On a check, the payee is the person or organization to whom the check is written. For online payments, you provide payee (or recipient) information when setting up automatic transfers.

Paper Checks

When using checks, the payee’s name goes on the line that says, “Pay to the order of.” That person (or business, nonprofit, or other entity) is the only one authorized to negotiate the check. They can deposit it, cash it, or potentially sign it over to somebody else.

For example, on your paycheck (or any other check you receive), you should see your name written on the check because you are the payee. If you write a check to pay rent, your landlord is the payee, so you write your landlord's name (or the business name) on the check.

Online Bill Payments

If you’re setting up online bill payments from your checking account, the payee is the business you want to pay (your utility provider, for example). Providing payee information tells your bank who receives the money and where to send the check or electronic payment. You may need to provide additional details, like your address or account number, so the utility company can apply the payment to your account. 

Payee Endorsement

When somebody uses a check or money order for payment, the payee typically must endorse the check by signing or stamping the back of the check. Endorsement authorizes the bank to collect funds on the payee’s behalf, and you can also provide instructions when making an endorsement. On some items (like checks and money orders), there’s a section for “Payee Endorsement,” which shows where the endorsement should go.

If there is more than one payee listed on a check, any one of them individually might be able to endorse the check, or they might all have to endorse the check. The rules depend on state law and the language on the check.

After endorsing a check, the payee presents it to a bank or credit union for deposit. The financial institutions (both the receiving bank and the payer’s bank, assuming they’re different) handle the rest of the process in the background, moving funds from the payer to the payee.

Representative Payees for Social Security

In some cases, Social Security and SSI benefit payments are made payable to a representative payee instead of the beneficiary (the person entitled to receive benefits) when the Social Security Administration believes that the beneficiary can’t manage funds on their own. In those situations, somebody else can help the beneficiary handle their money.

A representative payee is similar to a standard payee. That person can negotiate the check, but representative payees must manage money for the benefit of the actual beneficiary. As a result, the funds must be spent on (or saved for) things that help the beneficiary. It's illegal for a representative payee to enrich themselves with these funds.

An effective representative payee should improve the beneficiary's life and work in the beneficiary’s best interests. If a representative payee is taking advantage of their position, notify the Social Security Administration immediately.

Key Takeaways

  • A payee is a person or organization that receives payment for goods or services. 
  • Payment can be in any form, including cash, a check, a money order, or an electronic transfer of funds.
  • You typically encounter payees when banking. On a check, the payee is the person or organization to whom the check is written. For online payments, you provide payee (or recipient) information when setting up automatic transfers.
  • The Social Security Administration can appoint a representative payee to receive and manage funds from a beneficiary. A representative payee must use the funds in the best interest of the beneficiary. 

Article Sources

  1. Social Security. "Representative Payee." Accessed Aug. 10, 2020.