Tips • February 5, 2024
How to Endorse a Check
Endorsing a check may seem like a straightforward process, but it’s crucial that you make sure it’s done correctly. Otherwise, there could be issues or delays with the transaction you’re trying to complete. Or worse, it could leave you open to certain types of fraud.
In many ways, a check behaves like cash. When you hand the bank a check for deposit, you’re giving consent to have those funds put into your account.
Endorsements act as additional security features, which verify that the person writing the check has authorized the transaction, and the person receiving the funds is the legitimate payee.
Carefully following these simple steps for your next check transaction, and you'll not only reduce your risk of fraud or theft, but you'll avoid frustrating refusals where authorized persons are told they have a bad check.
What is a Check Endorsement?
Most of the time when someone writes a paper check, it requires a signature on the back as a form of verification that you're the intended recipient. This signature, as well as any other relevant information that’s required in order for the check to be processed efficiently, is called an endorsement.
These requirements could involve restrictive or special endorsements, which set specific circumstances for deposit. Endorsements can also be used to sign a check over to someone else.
These additional steps help reduce the opportunity for fraudulent check cashing or theft. However, not all banks require endorsements for checks to be cashed. You’ll have to check with your bank to determine what their requirements are for writing or cashing checks.
There are three distinct types of check endorsements:
- Blank endorsement: This type of endorsement is done when the check writer simply signs the back of the check on the endorsement line. Once the check is signed, it can be cashed into any account, by any person.
- Due to the potential risks of theft and check fraud with blank endorsements, it’s best to only use a blank endorsement if the payee will deposit checks to a bank teller in person.
- Special endorsement: These endorsements add ‘For deposit only’ above the payer’s signature. This means that the check can only be deposited into an account of the person or business listed on the ‘Pay to the order of’ line.
- Restrictive endorsement: A restrictive endorsement adds extra security to a check. This security step can be done by specifying detailed information about how and where the check is authorized for use.
This can be done by specifying either the authorized account holders, or the number of a specific account that is to be used to deposit checks. (i.e., ‘For deposit only to the account of John Smith’ or ‘For deposit into account 123456789’, etc.)
Anatomy of a Check
Before we dive into some tips for endorsing checks, it’s important to understand what each section of a check represents.
A check typically contains 12 different pieces of information. Every bank offers checks with a unique design, but the basic sections remain the same.
- Personal information: The account owner/s, their contact information, and, most importantly, the full name of the business.
- Payee information: Person or company receiving the check. Only that specific person or business can cash, deposit, or endorse the check to someone else. Otherwise, it can’t be deposited.
- Dollar amount box: This is the value of the check, written in numbers. It should always match the amount in the written amount section.
- Written amount: This is the check amount, written in full words. This is the most required piece of information on the check and needs to be written legibly. No short forms.
- Memo line: The purpose of the check. When writing checks for your business, this line can be vital for helping you track your expenses, so you include it in your deductions at tax time.
- Date: The date of the check. You can write in either the current date or a future date, also called postdating. Postdating means that the check can’t be processed by the bank until the date you’ve specified.
- Signature line: The signature of the account owner. This should be your last step, and it should match the signature the bank has on file.
- Bank contact information: This can be the bank’s logo, address, or phone number.
- Banks routing number: This is how the bank is identified within the banking system, so other banks know where they can find your account. These are printed with magnetic ink to make the checking process easier.
- Personal account number: This represents the account number for the payer’s bank account.
- Check number: This appears in 2 places, to help account owners track their checks.
- Bank fractional number/ABA: The American Bankers Association (ABA) number represents your bank, its location, and the Federal Reserve branch that serves your bank.
A Useful Guide to Check Endorsement
Now that you understand what check endorsement is, and what each section of the check represents, let’s discuss some useful tips to keep in mind when you’re endorsing checks:
1) Always Double-check Your Check
There are several things to monitor, to ensure your transaction goes as smoothly as possible, and you’re always protected.
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 that the check is invalid.
Some of the most common reasons a check is refused include:
- The written amount doesn’t match the numerical amount.
- The check has a spelling mistake or can't be read (incorrect spelling or illegible writing also makes mobile deposits more likely to fail)
- The check isn’t dated, or the date is wrong.
- The check hasn’t been signed or endorsed.
- The signature is notably different from the one the bank has on file.
- The check has been altered. If the check appears to have been changed with scratch-outs, write-overs, different-colored inks, or multiple handwriting styles, it will be rejected. Even if you made the changes.
If you find that the check isn’t legitimate, it’s best to destroy it right away. Or, you can allow the bank to take care of it. Then you should write/request a new check.
2) Only the Payee Can Sign/Endorse the Check
Whoever is listed as the payee on the front of the check, is the only person authorized to sign it. Therefore, it’s crucial that the payer gets this information correct, when they’re filling out the check.
However, there are some key things to note:
- How the check is addressed, determines how many signatures you need.
For example: 1 name = one signature; 2 names with an “&” means both of the named parties are required to sign; 2 names with “and/or” means a signature from either one is acceptible.
- If the check is addressed to your LLC or business, then you need to make sure that the person who signs the business check has signing authority, and that their signature matches the one the bank has on file.
- Every bank has preferences above what the Federal Reserve mandates. They may have practices or specific rules around how to endorse a check, add protections to it, or sign a check over to someone else.
3) Don’t Rush Signatures/Endorsements
Most checks have an “Endorse here” area, or a specific box on the back of the check. Whether you’re doing it via mobile or in person, make sure you write in the information neatly and within the lines.
When the writing is illegible, or the signature isn’t contained within the allotted area, the bank could refuse the check. You can save yourself the hassle of having to write a new check, by taking the time to write information clearly the first time.
If you’re signing the check over to someone else, you need to write “Pay to the Order of [recipient name]” below your signature. It’s best to do this with a black or blue pen, and include your job title to demonstrate you’re authorized to make this change.
4) Add Additional Restrictions to Checks
If you want to ensure a check can only be cashed by a specific person, or you’d like it deposited into a specific account, you should always include additional protections.
Don’t leave things up to chance. 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.
This way you’re protected after the check is out of your hands, and you can avoid a possible security risk.
Finally, sign your name below the restriction. By doing this, you officially authorize the protection. It’s important to note that if you sign the check anywhere except below the restriction, it’s considered invalid.
5) Be Careful When Signing Checks Over to Someone Else
Also known as a third-party check, this is where the original recipient of a check signs it over to a third person.
This is an easier alternative to depositing the original check addressed to you, and then writing a new one to pay someone else (i.e., a supplier, a vendor, etc.).
However, before you consider this, find out if both your bank and their bank allows this. Some banks don’t accept third-party checks.
If both banks allow third-party endorsements, then you can endorse the check by signing the back of it, and then writing “Pay to the order of [person’s first and last name]” under your signature.
Coordinate with the person to find out which bank the deposit will go into. The bank might require you to go with the payee, to assure the bank that there’s nothing suspicious about your transaction.
6) Depositing Checks Involves More Than Just a Hand-off
Whether you’re just endorsing the check, adding protections, or signing it over to a third party, this is your last stop.
Once signed, an endorsed check with no restrictions becomes a “bearer instrument”, meaning that it’s immediately cashable. If you lose it, that becomes a major problem.
You also can’t forget about the lifespan of a check. On average, the lifespan of a check is 6 months or 180 days. However, some checks may have “void after 90 days” preprinted on them. It all depends on the banking institution that issued the checks.
If you choose to put some protections/restrictions on your check, then it can be deposited at any time, within the lifespan of the check. Once endorsed, the bank will only deposit it into the account of the listed payee.
With all of these factors in mind, it’s best to develop some good habits for making deposits, such as:
- If you’re taking the check to the bank, don’t endorse it until you get there. You should always do this in front of the teller, or right before you deposit it into an ATM. This reduces the risk of losing a fully endorsed check that has your name and account number on it.
- If someone else is taking the check to the bank for you, then after you endorse it, you should put it into a sealed envelope.
- Consider cutting out the entire physical bank deposit, and do your deposits directly through your bank’s online platform or mobile banking app.
7) There are Benefits to Mobile Check Endorsement & Deposit
In today’s digital age, almost every financial institution has gone through a digital transformation and adopted fintech solutions, including offering mobile banking solutions through an app.
Depositing through mobile is as simple as taking a photo of the front and back of your check, and then the pending deposit will show up in your account, assuming you’re authorized to make the deposit.
With that said, there are some key things to monitor:
- Make sure your endorsement stays within the endorsement area. You’re no longer relying on an objective person to allow the check for processing. These apps rely on an algorithm that records whether the endorsement is within a defined area or not. There’s no room for error.
- It’s best to include “For mobile deposit only” in the endorsement area. This is mandatory for some banks. Checks that don’t include it could be rejected.
- Most importantly, follow directions. Apps are constantly being updated and improved. Processes can change from one version to the next. When the bank offers you updated mobile deposit information, read it and take note of any policy changes, before you make any future deposits.
Truly Financial Makes it Easy
We know how hard it is to be a small business owner. You’re trying to get the most value out of the money you spend, so you can help your business grow.
With Truly Financial, you can stop stressing over checks and endorsements. We’re happy to skip all the fat-cat banking ideas and complex financial terms, so we can provide you with the best options for your business.
Join the small business banking revolution – sign up now!
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