Do You Endorse a Check to Deposit It?

Endorsing a check

A checks is a contract between you and the recipient that promises you have the funds to pay him. A checks is also a command to your bank to release those funds to the person named on the front of the check. The endorsement is a sworn statement by the person cashing the check that he is the person named on the front of the check, or the authorized representative of that person.

Considerations

When you present a check, you are telling the recipient you have real money somewhere else. The recipient can present your check to your bank or his own. If he presents the check to his own bank, his bank will swear to yours that he is who he says he is. But what about the person who does not have a bank account? Some banks will cash checks drawn on them without charging a fee. Others charge $4 or more, which can take quite a bite out of a smaller check. Because of this, some people will endorse a check with their own name, then add "Pay to the order of" and the name of the person who is willing to cash the check for them. That person must then also endorse, or sign, the check before presenting it to the bank.

If the original recipient of the check cannot make the deposit in person, he may designate someone else to do so. To avoid a third party finding or even stealing an endorsed check, the words, "... for deposit only, to the account of..." may be added. This ensures that someone who finds or takes the check cannot cash it and take the funds.

Identification

The endorsement on the back of the check is an added layer of protection for both the account owner and the recipient. It assures the account holder that the person to whom she wrote the check is the one who received the funds. The endorsement also protects the recipient by ensuring that only he or his authorized representative can cash or deposit the check. If you routinely endorse the back of every check you receive, it will be a lot easier for you to prove that someone forged your signature when a check is stolen.

Effects

If you deposit a check without a signature and then write checks on your account based on the expectation that the funds are available, you can wind up with overdraft fees and other penalties. This is because banks often put a hold on unsigned checks until your right to receive those funds can be verified. In some states, such as Mississippi, presenting a bad check can put you in legal jeopardy and even cost you your right to vote if you are not able to remedy the situation immediately.

Misconceptions

Many people think that writing "for deposit only" will protect their check in case it is lost or stolen. The level of this protection depends entirely on the actions of your bank's employees and the judgment of its manager. If a bank employee deposits a check into someone's account without making sure to get ID or a thumbprint, you could become a victim of identity theft. Even if you are able to prove that the employee did not check ID, you might not be able to get your funds returned to you if the bank can show that you have a history of not endorsing your checks properly.

Prevention/Solution

The best way to prevent someone else from cashing your checks is to always endorse them at the window, never in advance. Endorse every check you deposit, so you will not have trouble later. Do your own banking rather than having someone deposit checks or make other transactions for you. Check with your bank at least once a month, especially if you think something is wrong with your transaction history.

References

• Privacy Rights Clearinghouse: Prevent Identity Theft

Resources

• Money Instructor: Endorsing Checks
• Anti-Phishing Working Group: How to Avoid Phishing Scams