Business Banking

How to endorse a check

Endorsing a check simply means that you agree to accept the money being paid to your account with the check. It involves signing the back of the check. That signature is called an endorsement.

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When someone writes a check to you or your business, you may need to endorse it before cashing or depositing it. This is a security measure meant to verify that you’re the intended recipient. Otherwise, without a proper endorsement, the check could be declined.

From the start, the process of endorsing a check seems simple and straightforward and it is, because it’s essentially you, putting a signature on the back of the check.

However, it can get complicated quickly if you make an error. It can also be tricky if you are new to cash-checking altogether. Therefore, because correct cash-checking procedures often lead to consumers having several FAQs, we’re going to help you through the entire process. But first, below are the key points to keep in mind before you endorse a business or personal check:

   • Match your names: For the check to be valid, the name on the endorsement (back of the check) must match the one on the front (payee’s name). If your name was incorrectly written, then you’ll need to sign the check with the incorrect version of the name and then sign it a second time with the correct version of your name.

   • Find the endorsement area: Checks typically have a 1.5-inch line on the back where the payee can endorse. Oftentimes you’ll see it labeled as “Endorse Check Here” or simply “Endorse Here.” This is where you should sign the check. Whether it’s a physical or mobile check, make sure that the signature and all additional details stay within the area as any new check will require your signature before you deposit it into your checking or savings account.

   • Confirm guidelines: Some banks and financial institutions have their own guidelines for endorsing a business or personal check. You may want to check your bank’s guidelines to ensure that you don’t make a mistake.

What Does It Mean to Endorse a Check?

Endorsing a check simply means that you – the payee – agree to accept the money being paid to your account with the said check. It involves signing the back of the check. That signature is called an endorsement.

What is the purpose of a check endorsement?

A check endorsement is a written instruction from the owner of a check to a bank teller authorizing the bank to pay the check to a named beneficiary. The endorsed check must include the name of the person or name of business who is to receive payment and may also include a message or signature from the owner.

‍Endorsements are used by banks to ensure that payments are made only to authorized recipients. When a check is presented for payment, the bank will compare the name on the endorsement with the name on the check in order to verify that both are authorized to receive payment. If there is no endorsement, or if the names do not match, the bank will refuse payment.

‍What are the risks of endorsing a check?

When a person writes a check, they are essentially asking the bank to pay for something on their behalf. The bank will then cash the check, meaning it will pay the vendor that the check is written out to. However, endorsing a check comes with some risks for both the issuer and cashing party.

For starters, if the check is fraudulent, the check writer could be held liable. This is because when you endorse a check, you're essentially vouching for its validity.  Endorsing a check is like giving someone a blank check. The person who cashes the check can withdraw all of the money from the account, even if there's not enough funds to cover it. This could cause problems for the person who endorsed the check, since they are responsible for any money that's lost.

So, if it turns out that the check was fake, the bank can come after the person who endorsed it to get their money back.

‍In addition, if the issuing bank decides not to honor a check - even if it's legitimate - the cashing party could be out of luck. 

‍Types Of Check Endorsements

There are four types of check endorsements. Each type determines how the check can be deposited. Here’s a summary of each:

Blank endorsement

This refers to when you sign on the back of a check without providing additional restrictions. As such, anyone who gets their hands on the check can deposit it. This holds true even if their name doesn’t appear in the payee section.

This lack of restriction creates a security concern because if you lose the check, someone else can deposit it in their account. For this reason, only sign a blank endorsement when you’re ready to deposit the check. Preferably do it while inside the bank and try as much as possible to avoid a blank endorsement on a check that you’re planning to mail or deposit at an ATM.

Restrictive endorsement

Contrary to a blank endorsement which can be deposited into any account, a restrictive endorsement ensures that the check is only deposited in a specific account. To use this type of endorsement, add your signature and a description like “for deposit only to account of payee” or “for deposit only to account ##,” where ## refers to a particular account number.

There are a few reasons why you might want to endorse a check in a restrictive manner. Perhaps you don't want the funds to be available until a specific date or you want to make sure that the check is deposited into a specific account. Restrictive endorsements can also help protect against fraud.

If you're concerned about the security of your personal finances, it's important to understand how restrictive endorsements work and when they can be used. Talk to your bank about what restrictions are available for your account and how to use them safely and effectively.

‍Special endorsement

A special endorsement allows you – the payee – to make a check payable to a third party. In which case, your name will appear on the front of the check as the payee. However, on the back of the check, you will indicate “pay to the order of ##,” where ## refers to the bank account number and details of the person receiving the money, including their bank routing number.

It’s important to note that some banks don’t allow special endorsements because they are prone to fraud and forgery. Therefore, keep this in mind when deciding whether writing a third party check or receiving one, as it can cause the check to bounce. Thus, you will be unable to deposit the funds into your account.

Business Endorsement

The final type of endorsement used is known as a business endorsement. If you are a small business owner or work for a company that pays others using checks, it’s likely that you will have to write a check on behalf of the business.

Therefore, business checks can only be endorsed by authorized employees who are legally liable to do so. If this, is you, then you would write the name of the business, and sign your name underneath to endorse the check on behalf of the company you work for.

‍Who Endorses a Check?

Oftentimes it is the payee who endorses a check. The payor has already signed on the front, leaving the payee to sign on the back.

However, things may vary slightly depending on who the check is addressed to. For example, if it’s addressed to multiple parties, say Mr. and Mrs. B, then both of them have to endorse the check. On the other hand, if the check is addressed as Mr. or Mrs. B, then either of them may endorse it.

If you’re a business owner with a separate (from your personal bank account), business bank account then business checks will be addressed to the business and not to you personally. In that case, either you – the proprietor – or an authorized figure in the business can endorse the check.

In case the check is payable to one party but for the benefit of (FBO) another party, then the first payee is the one to endorse it. For example, if person A makes out a check to person B for the benefit of person C, then person B will be the one to endorse it. Person C won’t need to.

What ways can a check be endorsed

When you deposit a check, the bank will scan it and make an image of both the front and back of the check. The image is then stored in the bank's computer system. The information from the check is used to create a "check clearing" file, which is sent to other banks where the check was deposited.

There are three ways that a check can be endorsed: 

1) By signing your name on the back of the check; 

2) By using a mobile banking app to endorse the check electronically; or 

3) By using an online banking system to endorse the check electronically.

‍Endorsing a Check for Mobile Deposit

The process of endorsing a check via a mobile device is slightly different from that of endorsing a physical check. For starters, most banks have their own requirements for mobile deposit endorsements. Be sure to read them before you proceed to endorse a check for mobile deposit.

Besides that, it’s important to include the description “for mobile deposit only.” Although this is not a rule that’s written in stone, most banks require you to do it anyway.

‍If you need a safe business checking account that can let you deposit checks, sign up for Nearside Checking for Small Businesses. A business checking account with no monthly fees and no minimum deposit requirements, Nearside is your perfect partner for starting and growing your business.

Common Problems with Endorsed Check Cashing

Furthermore, there are several challenges that come along with endorsing a check. Therefore, to avoid these in the future, take a look avoid these when writing checks, yourself, and endorsing checks you have received.

Name Misspellings

One of the most common issues that people face when they attempt to cash checks is discovering that their name is spelt incorrectly. When this occurs, your financial institution or credit union may refuse to process the check as it can raise suspicion. Therefore, you’ll have to contact the business or individual who wrote the check and ask them to correct the spelling before you can successfully deposit money into your bank account.

Numerous Payees

Moreover, another common problem people face happens when the check is made out to multiple payees. For example, you have been invited to a wedding, you may wish to provide the couple with a cash check as a gift. However, when writing the check, people commonly put “Jane AND Jack Smith.” The use of the word and will require both payees to be present and endorse the check for it to be deposited. Ultimately, creating more of a hassle for payees. Therefore, if writing a check to multiple payees, rather than use the word and, make the check out to “Jane OR Jack Smith,” to prevent this from happening.

Final Thoughts on How to Endorse a Check

As you can see, there is more thought that goes into endorsing a check then you may have previously been aware of. Luckily, if you have made it to the end of our article, you’ll now have the knowledge and tips you need to cash checks with confidence.

Just remember that the name you sign matches the one of the front of the check and is spelled correctly. This will help you avoid any delays so you can begin spending money on your debit card again as soon as possible.

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