It’s still bound to happen from time to time. Grandma might send you birthday money. Your neighbor could buy some of your kid’s fundraiser candy. Or maybe you own a rental property and take in rent each month. In a world where apps, online bill pay and electronic transfers rule, you can still receive a hardcopy check.
It’s important to know how to property endorse a check and deposit it into your checking account quickly. The process of endorsing a check is pretty straightforward, but you need to ensure it is done correctly to avoid delays.
Before You Endorse a Check
In addition to personal hassles (delayed or rejected payments, misdirected fund transfers, the need to re-write a check), erroneous check endorsements can have legal implications. Though not considered legal tender, checks are a form of negotiable instruments that serve as a promise to transfer money from one party (remitter) to another (payee).
A wrongly-endorsed check could spell legal trouble for the remitter/payee.
When it comes to the duty to accept an endorsement, banks and other financial institutions (such as credit unions) have a fair degree of latitude. To ensure that the accepting financial institution doesn’t reject or dishonor your check, make sure you endorse it appropriately before you date and sign it.
Here are some pointers to note before you endorse the check for payment.
Respect the Endorsement Area
Make sure you restrict your endorsement entries within the designated area on the back of the check. Typically, the reverse side of the check has endorsement regions clearly marked, either vertically on the left/right of the check or horizontally across the entire check.
Some institutions will not honor the check if you haven’t complied with their guidelines to respect the endorsement area.
Be Aware of 3rd-Party Endorsement Guidelines
Some institutions may not accept third-party endorsements at all, while others may accept them with caveats.
Other institutions may ask that you guarantee the endorsement or may insist that you prove your identity before processing the check. To avoid any issues, make sure you understand your financial institution’s guidelines and communicate them to the payee.
Understand the Implications of Multiple Names
You may get a check that has multiple names on it, written a couple of different ways: “Pay to the order of Jane Doe and John Q. Public” or “Pay to the order of Jane Doe and/or John Q Public.”
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.
Each institution has its own guidelines, and depending on its policies, institutions may require either or both parties to endorse the check before they deposit it.
Endorsements with Account Numbers
Some institutions encourage you to write an account number when endorsing the check. Others discourage it as a privacy/security risk. Make sure you understand and comply with your institution’s policies.
When you endorse a check, be sure your name matches or is similar to how the remitter wrote your name on the front of the check. Financial institutions can reject or decline to process checks that fail to meet this requirement.
When you endorse your check, write clearly and legibly. Use a fine-tip ballpoint pen and stay away from fountain pens or pencils. Read the fine print in your financial institution’s service agreement before you open a bank account.
Steps to Endorse a Check
Check endorsements can vary depending on the objective for which the check is being issued. As a result, the steps that you follow to correctly endorse the check will depend on the type of endorsement made. Some endorsements only require a single step, a signature on the reverse of the check. Others require specific language and additional information for a valid endorsement.
Generally, for a financial institution to accept the check:
- The check must contain the payee’s name on the front.
- The front must have a face value, both in words and numbers.
- It should have an appropriate endorsement on the reverse.
- The remitter’s signature and a date must be present.
Here are some of the most common types of endorsements and the steps needed to complete them:
The term blank is a bit of a misnomer, as it seems to indicate that the check contains no endorsement. However, as we see from the image below, the remitter does endorse the reverse of the check, but since there are no additional instructions (left blank), it’s called a blank endorsement.
Blank endorsements are the most common type of check endorsement. You typically use this type of endorsement to cash or deposit the check yourself, or to give it to someone else to cash or deposit.
- The payee signs his/her name on the reverse of the endorsed check.
- Be sure the signature matches the one on the front of the check.
Caution: Anyone in physical possession of a blank endorsed check can negotiate it.
Restrictive endorsements limit deposit options. Restrictive endorsements are a safe method to use. This endorsement prevents anyone else, other than the intended payees, from negotiating (or cashing) the check.
To perform a restrictive endorsement:
- Write the phrase “for deposit only” or “for deposit to account number” and/or specify your preferred account.
- Sign your name on the next line, ensuring the signature matches the name on the front of the check.
A special endorsement is commonly used to pay contractors or third parties for services rendered.
An example might be when your insurance company (remitter) issues a check to you (payee) and you then need to endorse it to an auto body shop (3rd party) for work done on your car.
To create a special endorsement:
- Write “pay to the order of…” and name the person/institution who will receive the money.
- Next, sign your name below as it appears in the signature on the face of the check.
Unlike a blank check, a special endorsement check enables only the person/institution whose name appears on the endorsement to deposit or cash it.
Mobile Deposit Endorsement
In 2018, new banking regulations mandated the endorsement of electronically-deposited checks using Remote Deposit Capture (RDC) technology.
To endorse a check for mobile payment:
- Include the phrase “for mobile deposit only” as part of the endorsement.
Depending on specific guidelines enforced by each financial institution, this endorsement phrase may be included above your signature or below your signature.
Although some checks have a pre-printed checkbox indicating mobile deposit, the endorsement process isn’t legally complete until you write the phrase “for mobile deposit only” on the back of the check.
There are still a couple of other endorsement options: qualified endorsement and conditional endorsement.
This type of endorsement passes title of the check to the payee, but with certain conditions/restrictions. You qualify the check by writing the words “without recourse” in the endorsement area. Qualified endorsements typically absolve the endorser from the responsibility of payment if, for any reason, the check is not honored.
This type of endorsement sets out specific conditions, on the back of the check, for the payment of the check. For instance, the check might say, “Payable to Henry Public upon satisfactory completion of home renovation.” Before accepting the check (or cashing it) the financial institution may ask for proof that the payee has complied with the condition endorsed.
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.
Endorse with Confidence
Next time you take an old school check in your hand, review its purpose and determine the proper endorsement. Knowing how to endorse a check is part of personal finance management. Use our guide to review all the endorsement types, and endorse your next check with confidence.