Do you know how to sign a check? In a world of online bank transfers and mobile banking, checks may no longer feel like a necessity. But there are still instances where a check may be useful like when tenants pay rent to their landlords or freelancers receive payments for their services.
If you’ve recently received a check but can’t deposit it yourself, we’re here to help.
Checks are often used to transfer a specific sum of money from one party, which can be a person, company, or organization, to another. They’re usually passed between two parties only but the recipient, known as the payee, can choose to give the check to someone else by turning it into a third-party check.
It’s a simple process that can be done by anyone. In this guide below, we show you how to sign a check over to someone just by following a few easy steps.
Can you deposit someone else’s check in your account?
Yes, if someone else’s check has been endorsed to you properly, you can deposit it in your account with little trouble.
This type of check, known as a third-party check, contains the signature of the original recipient of the check as well as instructions saying that the check can now be cashed or deposited by you, the third-party recipient.
You can verify this by checking the back of the check which will have the original recipient’s signature and the words “Pay to the order of (your first and last name)” under it.
These instructions tell the bank where you’re depositing or cashing the check that you have been given ownership of the check to receive the payable amount on it. Some banks may require you to also sign your name under the original recipient’s signature to confirm your rights to the check.
A third-party check can be processed by most banks but it’s important to keep in mind here that banks are not legally required to honor the instructions of a third-party check. They may consider third-party checks red flags because they cannot verify that the check was endorsed to you by the original recipient and not stolen from him or her.
What are some of the major hurdles someone experiences signing checks over to someone else?
Because banks can’t always check whether the third-party check you’ve received has been genuinely endorsed or not, they may refuse to cash or deposit it for you.
This is frustrating for many people who have received perfectly valid third-party checks from friends, family members, or business associates. The problem lies in the check processing system itself.
When banks accept third-party checks, they are taking a risk in trusting you, the drawee, to have received all of the verified endorsements from the check’s original recipient. The moment the bank processes the third-party check, they are bound by their state’s Uniform Commercial Code, specifically, section 3-417, to be liable for fraudulent practices.
The original recipient of the check may have between 60 days and three years to contact the person or organization that issued the check and claim that their third-party endorsement was forged.
If the third-party check is claimed as fraud, the bank loses the money. The person who deposited or cashed the third-party check also becomes liable for the losses.
In other instances, the bank may hold your third-party check while they investigate the origins of the check with the bank that issued it. As they do this, your bank account may get frozen to prevent any transactions that could be considered suspicious or illegal.
Is ID necessary to sign a check over to someone else?
ID is not necessary when signing a check over to someone else.
It may only be required when the new recipient of the check goes to the bank to cash or deposit the check. Under the USA Patriot Act, businesses, including banks, are required to request proper identification to process certain types of financial transactions as part of its “know your customer” regulation.
Some banks may ask to see just the new recipient’s ID. Others may request to see the IDs of both the new and original recipients of the check to protect everyone, including the bank, against claims of check fraud. The ID has to be government-issued with a picture on it, such as a passport or a driver’s license.
In some states, banks are allowed to swipe the magnetic strip of your driver’s license to verify your identity before cashing or depositing the check.
How to sign a check over to someone else
To sign a check over to someone else, you have to endorse it properly. A correct endorsement is important because it authenticates the check and gives your bank the authority to collect payment for you from the bank that issued the check.
Here’s what you need to do to sign a check over to someone else:
Get in touch with the bank that you received the check from
Different banks may have different rules and requirements on how a check can be signed over to a third-party. Call or visit that bank and ask what limitations they may have on third-party checks.
It’s also good to ask about the types of identification the new recipient of the check will need to present when depositing or cashing the check.
Verify that the new recipient’s bank will accept the check
After you’ve spoken with the bank that issued the check, ask the person you’re signing the check over to ask if their bank will accept third-party checks. Some banks may not accept them outright while others may ask for more information about the check.
Knowing the bank’s requirements will help you add the right phrases to the check as well as the right amount of signatures. You don’t want to make the endorsement area of the check messy by adding unnecessary words and signatures.
Endorse the back of the check
Once both banks verify that they can process third-party checks, you’ll need to endorse the back of the check by signing it. Most banks usually require you to write “Pay to the order of (the new recipient’s first and last name)” under your signature. Some banks may ask you to also add the new recipient’s signature under this phrase.
At this stage, make sure that your name matches the name on the front of the check. If there are any misspellings, sign the back of the check with the incorrect name and then again with the correct spelling of your name.
Pass the check on to the new recipient
When the check has been signed and worded properly, it’s time to hand over the check to the new recipient. Exchange contact details with him or her so they can call you if the bank raises any concerns about the check.
They can also pass your contact details to the bank in case they need to call you to verify that you are the original recipient of the check.
In some cases, you may need to go to the bank with the new recipient
Some banks may process third-party checks faster and with more confidence if the original recipient of the check goes to the bank together with the new recipient.
Showing your ID and verifying with the bank teller that you endorsed the third-party check can help them know that the check was not fraudulently acquired.
Is it possible to sign electronic checks over to someone else?
At the moment, it’s not possible to sign a check electronically and transfer it over to someone else.
An electronic check, or an eCheck, is a more secure, digital version of a traditional paper check. When an electronic check is deposited, the money is electronically withdrawn from the payer’s account, transferred over the “Automated Clearing House” (ACH) network used by U.S. financial institutions, and deposited in the payee’s account.
Although electronic checks work just like paper checks and are governed by the same laws, their rigid digital nature, requiring automated systems instead of human bank tellers, limits the options available for cashing or depositing them.
Most electronic checks only have spaces to add routing numbers, account numbers, payment amounts, and the name of the bank account holder.
And when they are processed, they only pass through five different parties: the party receiving the payment, the recipient’s bank, the payer’s bank, the payer, and the ACH operator who manages the fund request and transfers the fund between the two banks.
Also, electronic checks are checked by the ACH operator for duplicates and digital signatures. These processes and security protections restrict electronic checks between the payer and one recipient only. As of now, there seems to be no option to turn the electronic check into an electronic third-party check that can be sent to someone else.
Check-cashing scams: how to avoid them
Check-cashing scams happen in many different ways. Most of the time scammers will send people bad checks or checks with amounts that are more than what they are owed.
Scammers may hire people as mystery shoppers to evaluate gift card retailers or money transfer services. They send the new hires a fake check to deposit and ask them to transfer their money first to another person using the service or retailer they’re evaluating while the check is being processed.
Other scammers may hunt for victims on online marketplace websites like craigslist or eBay. They may buy something from people online and “accidentally” send a check that’s way over the payment amount. Citing the mistake, they will then ask the person selling the item to refund the balance while the check is still being processed.
What scammers do is take advantage of the time it takes for banks to process checks, which can take anywhere from 2 days to more than 2 weeks. The checks look real, or may even be real checks, with the names and logos of legitimate financial institutions printed on them.
The best way for you to protect yourself against check-cashing scams is to:
Reject checks that have a payment value that’s more than what you are owed
Scammers send checks with unusually large amounts because they want you to transfer the accidental “excess” amount to another account.
Only trust checks from people you know
Personal checks cannot be immediately verified by banks that there is money in the payer’s account. This will only be known when the check is cashed, which may by then reveal that the bank account number on the check is fake or the account doesn’t have any money in it.
If you get a job as a personal assistant or a mystery shopper and are sent a check to deposit to wire the money back to your “employer”, don’t.
There’s no reason for you to transfer money back to them using money from your bank account. Your bank account is separate from what the company needs to use for business transactions.
Check the authenticity of the check
Make sure that the check was issued by a legitimate bank; call to check if necessary. Look for irregularities in watermarks and security threads. Identify where the check was mailed from; if it was mailed from overseas or a state where the bank does not have branches, it could be a scam.
Never share personal details with a stranger
Most importantly, never give out your bank account number, PIN, debit or credit card number, birthday, or any other sensitive information to strangers. They can steal your identity and make fraudulent transactions with this information.
Alternatives to signing checks over to someone else
You should only sign a check over to someone else if you don’t have a bank account or are experiencing problems with your bank account like a temporary suspension.
Here are some alternatives if you want to cash or deposit the check without signing it over to someone else.
If you have a bank account, cash or deposit the check yourself
Going to a bank and cashing or depositing a check yourself will give you a much better guarantee that the bank will process the check for you. Banks will usually give you the first $200 of funds from a check within one business day.
Some banks also allow you to deposit checks at an ATM or a mobile banking app. Once you’ve successfully deposited the check, you can transfer the funds to the third party using wire transfers, peer-to-peer finance platforms, and ATM withdrawals.
Cash it at the issuing bank
Alternatively, you could go to the bank that issued the check if you need access to the money quickly. Going straight to the issuing bank cuts out the transaction time required to process the check. The bank can immediately check whether the account that the payable amount will be drawn from has enough money to cover the transaction.
The bank may charge you a fee for the processing if you don’t have an account with them.
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