Although checks are quickly giving up their place to electronic payments, those time-honored papers are still in use. However, with the security issues swirling around them, making sure that you endorse a check properly is more important than ever.

One look at the numbers and you’ll see that fraud is at an all-time high. In 2020 alone, the FTC received a staggering 2.2 million fraud reports. Amid these conditions, it surely helps to get yourself familiar with the procedures, and know-how to endorse a check the right way.

Business Services Coaching

Empty

It’s the financial way of saying “signing a check.” Why the fancy mumbo-jumbo, then? Because there’s more to it than just signing. 

Endorsing a check is both an act of authorization and verification. It authorizes the bank to turn the money into cash and verifies you as the rightful recipient.

Endorsing a check also specifies the action you want to take using the check. You can either cash the money, deposit it, or transfer the ownership of this check to someone of your choosing. 

There are other scenarios in which things get a bit more complicated, but let’s put a pin in that and start with the basics.

What Does Endorsing a Check Mean?

The simple way of putting it: sign your name on the back in the designated area. This can be a blank line with an X next to it or an area marked by the words, “Endorse here.” 

Similarly, there’s an area on the back of the check that you shouldn’t ink whatsoever. This area typically lies below a certain line, and you may find the words, “Don’t endorse here.” Only the bank should use that area for its procedures.

Aside from your name, the endorsement should also include instructions, aka restrictions. See, when you simply sign with no further information, you leave yourself exposed.

If your signed, ready-to-cash check falls into the wrong hands, the money in it becomes up for grabs. Chances are, anyone who carries the check can take the money, depending on the process your bank follows.

That’s why you should pay vigilant attention to two elements: the instructions you write on the check, and the timing of the endorsement. According to the instructions included, endorsed checks can be classified into different types.

Email Assistance Online

How to Endorse a Check?

There are three main types of endorsement: blank, restrictive, and third-party. Let’s break down each type in detail. 

As the name suggests, a blank endorsement is an endorsement that’s blank except for the signature of the payee, aka the receiver. 

It doesn’t specify what the bank should do with the check and doesn’t bear the clear name of the payee. Therefore, it becomes a bearer instrument. Meaning, whoever is in possession of it can cash it. 

So, to make sure that your blank endorsement is more secure, keep in mind the second element we mentioned before: timing. 

Don’t sign the check until you’re in the bank or at the ATM. Otherwise, it’ll be wise to add restrictions alongside your signature.

With this type, you state what you want to do with the check even before signing your name, by writing the three words, “For deposit only.” 

You could also include your bank account so the money can only be deposited in it. However, some people and banks view writing the bank account number as a security risk. So, while this type of endorsement is safer than the previous one, it’s still a good idea to endorse the check just before meeting the banker.

Otherwise known as “special endorsement,” this type is when you hand the ownership of the check over to someone. You do that by writing, “Pay to the order of,” followed by the person’s name.

This way, only the person you wrote their name in the endorsement can cash it. However, you have to know that it’s better to deposit the check you’ve received, and then write a new one for whomever you want to pay. That’s because some banks reject third-party checks for fear of fraud.

What Are the Types of Check Endorsement?

There are some special scenarios that you need to be aware of regarding check endorsement.

FBO is short for “For the benefit of.” In these checks, the money is paid to someone only to be used for a specific purpose. This is usually done when sending funds to an institution, like an assisted living facility, where a person of interest resides. 

The check could also be sent to a single person and not a facility, in the case of custodians. Either way, endorsing such checks may only require the signature of the custodian. Most often, however, both the custodian and the person of interest have to endorse the check. 

This can constitute a problem if the person you want to benefit from the money can’t endorse the check due to a health issue or otherwise. If that’s the case, consult with the bank about what you need to do.

When a check is made payable to more than one person, the endorsement will depend on whether it’s an “and” or an “or” situation. 

For example, if the front of the check states that the payees are Jane and Austin, then both of them have to endorse the check.

On the other hand, if it says Jane or Austin, then only one of the two will suffice. That’s why it’s important to check carefully; you don’t want Jane to go to the bank alone to find out she should’ve brought Austin along, do you?

This is when the check is written for a company to be received by someone that represents it. If you’re the authorized representative, then you should endorse the check as follows. 

First, write the name of the company exactly as written on the front of the check, then write your name. After that, include your role in the company, such as owner or CEO. Finally, you can write restrictions, like “For deposit only.”

Are There Other Types of Check Endorsement?

Good old checks are still holding on for dear life as a payment method. So, it’s only right to know how to deal with checks properly. A huge part of that is knowing how to endorse them. 

Endorsing a check means signing it and including any further instructions or a bank account number. That serves to restrict what can be done with the check, and therefore adds an extra layer of security. 

What adds even more security is waiting until the last minute before endorsing a check. This way, you bring any chances of fraud close to zero!

How to Endorse a Check?

What Does Endorsing a Check Mean?

How to Endorse a Check?

What Are the Types of Check Endorsement?

Are There Other Types of Check Endorsement?

Conclusion

Related Articles: