Checks may seem pretty old-school, but they’re still widely used, even in 2021.
Banks offer checks for people to perform a variety of transactions, from paying their utility bills to gifting money to their friends. A check might look easy to use but there are actually quite a few rules to follow to make sure that it can be cashed or deposited without any issues.
Our team at Aspiration has put together this how-to guide to help you endorse a check properly. Whether you need to sign one over or simply cash one out, we’ve got it all covered in this article.
How do checks work?
A check is a slip of paper issued by a bank that allows you to make a monetary transaction between two or three parties. It replaces the need to exchange physical currency, which is always a risky thing to do if you’re exchanging huge sums of money.
For checks to work, they have to meet some important requirements. The person writing the check, known as a payor, has to make sure that they have enough money in their bank account to make the payment. The check also needs to be dated and signed, with the transfer amount clearly written on the front of the check.
The payee, who is the person the check is written to, can cash or deposit the check only if all this information is complete. When the payee goes to the bank to get the check processed, the bank performs a series of security verifications to make sure that the payee is the real recipient of the check.
Although checks are still common today, they’re not as widely used as before. Mobile banking, and debit and credit cards, are quickly replacing checks.
Can I cash a check that’s not in my name?
A check that’s not made in your name, but has been endorsed over to you, is called a third-party check. Third-party checks have the endorsement signature of the payee, plus an additional line that either says “Pay to (your name)” or “Pay to the order of (your name)”.
You can usually cash a third-party check without any problems at most large US banks. Checks below $3,000 should be accepted by most banks, but any amount above that could be refused by the bank for fraud protection purposes.
Do note that banks are not legally required to honor third-party checks. To increase your chances of being able to cash out a third-party check, go to the bank with the person depositing the check (the payor) and present a government-issued ID card along with the check.
Can you deposit someone else’s check in your account?
Yes, you can, as long as the check has been clearly endorsed and marked for deposit.
There are two ways this can be done: by using a deposit slip or a check that has been given a restrictive endorsement.
A deposit slip is a special form that verifies the check being deposited. It’s supplied by most banks and strengthens your check deposit request.
Make sure that you endorse all of the checks you want to deposit and fill out the deposit slip with the corresponding amounts accurately. If the information you have provided matches and has no inaccuracies, the deposit should get processed without any complications.
The other method is to rely on restrictive endorsement only. Checks with restrictive endorsements have the phrase “For deposit only” below the payee’s endorsement signature on the back of the check, plus a “Pay to (your name)” statement underneath it.
Most leading US banks such as Chase, Bank of America, and Wells Fargo will accept these checks under certain conditions. But again, keep in mind that they’re not legally obliged to honor third-party checks. It’s possible for you to do so, but it may not always work.
How do you sign a check over to someone else?
Signing a check over to someone else can sometimes be quite convenient for certain transactions. Maybe you might need to pay a third party, like an auto repair shop, the amount of the check written to you.
Or perhaps you might owe someone money but don’t have enough cash on hand. Instead of cashing out a check you already have, you can just sign over the check to that person.
To sign a check over to someone else, you have to follow a few simple steps to make sure that the check can be processed by the person you’re giving it to.
First, make sure that the person or entity you’re signing over to can accept the check and is willing to do so. Their bank should confirm that they can process the check. Some banks may refuse to cash or deposit third-party checks because of fraud protection measures.
Endorse the check
Then endorse the check in full. To do so, write ‘Pay to the order of (and the name of the person you’re signing over to’ on the back of the check in the area where it says ‘Endorse check here’. Sign your name underneath it.
This short note, along with your signature, waives your rights to the check and transfers them to the person you’re signing over to.
Give the check to the specified person and be prepared to go to the bank with them
Once you’re done writing the check, give it to the third-party and go with them to their bank, if possible. Some banks may require the person who has endorsed the check to provide a valid government-issued ID.
At this stage, the third-party may also need to sign their signature in the endorsement area, below your signature, depending on the requirements of their bank.
Following the steps above will increase the chances of the signed-over check being cashed or deposited successfully.
Different ways to endorse a check
You can endorse a check for several purposes.
If you need to simply cash or deposit a check that’s addressed to you, you can just sign your name in the endorsement area on the back of the check. This is called a blank endorsement.
It’s the most common way of endorsing a check but also the least secure. To prevent potential theft of your check, make sure you sign it just before you deposit or cash it.
If you want to only deposit the check, you can make an endorsement called a ‘restrictive endorsement’. This requires your signature and a note saying, ‘For deposit only’. Adding your account number after ‘For deposit only’ makes sure that the check can only be deposited into your account.
For checks that you want to sign over to someone else, you can create a third-party check, as we’ve discussed above. A third-party check requires an endorsement in full, which can be done by writing ‘Pay to the order of (and the third-party’s name)’ on the back of the check with your signature below it.
Do green banks offer checks as traditional banks do?
Green banks offer checks just like traditional banks do.
Aspiration, Amalgamated Bank, Beneficial State Bank, City First Bank, and Sunrise Banks are some of America’s well-known green banks that provide checks to their customers. You can order the checks online or go into any of their branches to request them.
These checks can be used to pay your bills or your taxes, just like you would with a regular check. They can even be used to pay for your rent, as some landlords prefer checks over cash or bank transfers.
When depositing checks, some green banks may not accept checks that have been signed over to you. Amalgamated Bank, for example, has clear mobile banking policies that limit account owners to deposit checks drawn on U.S. banks in U.S. dollars and addressed only to them.
That said, checking accounts with green banks do have their own perks. Aspiration, for example, doesn’t collect any check deposit fees at all. Better yet, you can deposit a check using your phone by taking a photo of it and uploading it to their app.
Can I use checks with Aspiration’s Spend & Save account?
Most definitely. You can order checks from Aspiration and they’ll be linked to your Spend account.
Aspiration’s checks allow you to make everyday transactions, from paying for services to gifting money to a friend. If you’ve received a check and want to deposit it, you can do so easily with the Aspiration app on your phone.
The ‘Check Deposit’ section in the app allows you to deposit checks that have been endorsed with your signature. Simply upload a photo of your check to the app and it will automatically deposit the amount into your account. Processing takes about 2 days on average but could go up to 5 days for large amounts.
Checks that have been signed over to you, despite your endorsement, won’t be accepted, unfortunately. For payments from friends and family, we recommend that you use electronic bank transfers instead.
3 mistakes to avoid when endorsing a check
It’s best to avoid any mistakes when endorsing a check.
A bad check could create a negative record in your banking history. You could be barred from opening future checking accounts. You may also be hit with hefty penalties for a bounced check, which happens when the payor’s account doesn’t have enough money for the transaction.
To save yourself any headaches, keep aware of these common mistakes people make when endorsing checks.
The person who wrote the check is not the same person as the account holder
Always make sure that the person who wrote the check owns the account that the fund is coming from. Request to see the payor’s ID card, especially their name and address, to check if the information matches what’s on the check.
Any inaccuracies should be a red flag for you. Keep an eye out for temporary addresses as well, such as hotels and post office boxes. Notify the person immediately and ask for a new check. Identifying this problem before you endorse the check will help prevent any problems between you and your bank.
The date on the check is in the future
A check with a future date, commonly known as a post-dated check, puts you at risk of fraudulent behavior. This type of check cannot be cashed out immediately, exposing you to the possibility of the check bouncing. By the time you’re able to cash or deposit the check, the person who owes you the money may not have any money in their account and might no longer be reachable.
If you’ve been handed a post-dated check that seems wrong, contact the payor immediately and ask for a new check with the current date.
The check has been altered.
Checks with scribbles, different-colored inks, multiple handwriting styles, and scratch-outs can raise the suspicion of the bank teller. They may think the check has been stolen and altered and put you under investigation.
Always look for inaccuracies and alterations before you endorse a check. Double-check names, dates, and amounts. Even a small mistake can get you in trouble.