You don’t need to deposit the check and write a new one to the third party. Instead, you can endorse the check by writing “Pay to the order of [Person’s Name]” and then signing the check as you would normally. A mobile check deposit without an endorsement is likely to be rejected, even if initially accepted from your phone.
- But even in these modern times, many people and businesses use paper checks.
- Sometimes a check will be made out to a business rather than to an individual.
- You don’t need to deposit the check and write a new one to the third party.
- The bank then has the right to act on your behalf and negotiate the check.
” Sadly, digital technology and online banking have pushed the art of check writing to the side, but you still need to know your way around a paper check. Keep in mind that certain types of checks may require an endorsement even if your bank doesn’t. This is not considered a good practice to do, but it can be done. Some banks will not accept third-party checks due to the risk of fraud and most check-cashing places won’t accept them either. Keep in mind that the check writer may see a copy of the check through their bank.
When you receive a check from someone else, you need to endorse the check before you can deposit it into your account or cash it. A check endorsement is for security purposes to verify you are the intended recipient of the check. Your bank will probably tell you to deposit the funds into your account first then send the funds differently if you try to endorse a check this way. The check will bounce otherwise and you won’t be able to access the funds. To endorse a check, sign your name on the back and include any additional details required to process the check efficiently.
For businesses, the only person who can endorse a check is the company’s owner, unless another employee has been authorized to manage the business finances. Typically, the person receiving the check will need to endorse it. Of course, the person writing the check will need to sign it too, but their signature will go on the front of the check. You go to the endorsement section on the back, write “Pay to the Order of,” the person’s name next to it and sign the check.
If your intention is that either one of the parties should be able to cash the check, then use or instead of and or and/or. Reserve the use of and to only those transactions where you specifically require all payees to endorse the check jointly. In a world where apps, online bill pay and electronic transfers rule, you can still receive a hardcopy check.
The check is payable to the business—not to you, the individual who owns the business—so you need to sign on behalf of the business. Anybody else who endorses these checks needs to be authorized to handle funds for the company. Next time you take an old school check in your hand, review its purpose and determine the proper endorsement. Your kids might ask, “where do I sign a check,” and you can enlighten them using this information.
Double Check Your Check
If you aren’t going to cash checks yourself, or can’t do it in person, you should make sure these specifications are clearly listed. Everything from making sure that the check is filled out correctly, to making sure it isn’t modified after your endorsement. The last thing you want is to go all the way to the bank, only to find out shareholder vs stakeholder that the check is invalid. Before we dive into some tips for endorsing checks, it’s important to understand what each section of a check represents. The biggest difference is that you should typically fill out a deposit slip with your account number when you use the night drop, while you don’t need to do so for an ATM deposit.
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Blank endorsements are risky because somebody else can steal the endorsed check and potentially cash it or deposit it to a different account. Although these last 2 endorsements are common in business transactions, financial institutions usually have restrictive language in their Terms of Service (ToS) documents. Because of the added level of diligence placed on bank staff to validate and verify the endorsements, bank tellers have a fair degree of latitude for rejecting such checks. This is the least secure way to endorse a check, but it’s the most common. You do a blank endorsement by simply signing your name on the back of the check. Then, when you’re at the bank, you tell the teller if you want to cash it or deposit it.
Check costs may vary depending on the supplier and the style of check ordered. This endorsement approach is the most secure because it instructs your bank that funds should only be sent to the account you’ve specified. Funds can’t be given out as cash or deposited into any other account. But the person who wrote you the check will see your bank account number if they receive a copy of the canceled check from their bank. If you deposit checks using your mobile device, follow instructions on your bank’s app.
When To Endorse a Check
Every bank offers checks with a unique design, but the basic sections remain the same. When you hand the bank a check for deposit, you’re giving consent to have those funds put into your account. If there is a discrepancy in the written-out and numerical amounts, or if something is illegible, the check may not be honored.
Blank endorsement is a kind of signature on a financial instrument. It has no designated payee, so the person who possesses it can demand payment, for example, a check made payable to cash and endorsed on the back with the signature of the account held. The blank endorsement essentially makes the financial instrument into a bearer paper. The risk of a blank endorsement is that if it is lost or stolen, the finder can cash or deposit it. For extra security, you can still write “for deposit only” in the endorsement area. Technically that’s not an endorsement, but most banks and credit unions would be reluctant to cash that check for anyone.
If you need to endorse checks to cash for your business or deposit into your business’s bank account, the process is slightly different than it is for personal checks. Instead of depositing or cashing the check yourself, you can sign a check over to another person. In this situation, you will use a full endorsement, also known as a special endorsement or a third-party check endorsement. A third-party endorsement involves signing over a check made out to you to someone else. You first write “Pay to the order of,” followed by the name of the person you wish to have the funds. Many banks will no longer accept such an endorsement so make sure in advance that your bank will do so.
Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia. Choosing the best endorsement for a check requires careful consideration of individual needs and circumstances. Requesting transaction confirmations or contacting the bank directly can provide an additional layer of security and assurance. Verification can be achieved through identity checks, transaction confirmations, or even simple direct communication with the involved bank. In this digital age, with increasing cases of identity theft and fraud, extra caution is a necessity. When transacting, especially with unfamiliar parties, it’s vital to ensure the check is going to or coming from a genuine source.
She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. It’s advisable to verify the authenticity of the payee’s identity by comparing identification documents or conducting online searches if necessary.