What is the proper or best way to endorse a check? I know of 2 methods.
Pay to the order of Third National State Bank
Your Signature
or
For Deposit only
[account number]
Your Signature
I know that either will work. My WAG is that circulating your account number may enhance the chances of identity theft. OTOH, perhaps it also lowers the risk of bank error.
Apropos nothing, I also find it odd to write, “Pay to the order of…”, unless I am paying a bank fee.
Any bankers out there?
Former bank teller here…
(1) “Pay to the order of [BANK]” means that you are signing the check over to the bank. Why would you want to give the bank your money? You wouldn’t. I don’t recommend this endorsement.
(2) You can endorse a check with only your signature. This is acceptable. However, if you lose it, someone else may attempt to endorse it below you and cash it.
(3) Adding “for deposit only” is designed to prevent the above situation, restricting the check for deposit. This is not required, but it is the safest endorsement, assuming you want to deposit your check.
(4) A bank can stamp an endorsement. If you want to deposit money into my account, just write a check to me, take it to my bank, and tell them that you want to put it in Bearflag’s checking account. The teller will stamp the back of the check “for deposit only” with my account number.
Adding your account number with your endorsement tells the bank where the money went or is supposed to go. If your deposit slip and check get separated at the bank, then the bank can still put the check where it’s supposed to go by the account number on the back.
Every time you write a check to pay a bill or at a store, you give a stranger your account number, address, name, and signature. The risk of identity theft from an endorsement seems minimal.
Lastly, don’t endorse checks until you are about to negotiate them. You don’t want to lose endorsed checks. See (2) above.
Also, if you do not put your bank account number with your endorsement, that just means the bank teller will have to do it for you. Best if you save them the trouble by putting all of that info down while you stand in line. It makes the lines move much faster to have all of your desposit slips and stuff ready to go as soon as you hit the teller window.
Also, be aware that every time you endorse a check, the person who wrote you the check will have your signature and account number. I don’t know what you would do with that knowledge though.
Seems only fair; if they wrote you a check, you have their signature and account number as well.
I have in my notes from Commercial Law that, if you’re signing a check over to another person, the endorsement that covers your ass most completely is:
Pay to the order of X
(signature)
without recourse
(date)
I won’t bother explaining the significance of “pay to the order of” unless someone’s interested.
“Without recourse” helps you if the check gets passed around a bit. If, for some reason, the check gets dishonored down the line, there’s a chance that the persons to whom money is owed can come back and bite damn near everyone who signed the check. The “without recourse” gets you off the hook.
And you should include the date because it can help you keep track of things should the check be shut up in a drawer and not presented for payment in a timely fashion. Again, it’s insurance that can help get you off the hook if there’s a problem down the line.
Is all this necessary for a simple deposit? Not normally, no. But isn’t it nice to know it’s there?
To expand on something Bearflag said: a simple signature endorsement, without anything else, transforms the check into “bearer paper”. That means any yahoo who’s holding the thing is entitled to payment. So, you shouldn’t put a simple signature on a check unless you’re comfortable carrying an equal amount of cash, because essentially that’s what you’re doing.
Here’s a related question… I have a child, the child receives a gift of a check, what’s the right way to endorse it? Usually I just sign
Kid’s Name
My Name
or sometimes
“For deposit only”
Kid’s Name
My Name
It doesn’t seem to matter how I do it, they always take the check!
And, even more importantly, their bank routing number.
Just be sure not to do this if, in fact, what you want to do is cash the check. I once tried to get money back when depositing a check and the teller gave me a very stern lecture because I had clearly written “For Deposit Only” under my signature.
Yeah, once you’ve made a restrictive indorsement (which is what the FDO indorsement is called), the person/institution you give it to can be liable if they don’t follow the indorsement, so even if you’re standing there and have changed your mind, they still probably won’t risk it – after all, the FDO instruction is in writing, and your instructions aren’t.
–Cliffy
[ATM user] These words you’re using – “lines” and “tellers” – what do they mean? [/ATM user]
The only possible use of this info. I can think of is if you ever wanted to enforce a judgment against a person by going after his or her bank account.
This sounds right to me.
Thanks for the feedback, gang. (Nice presentation, Bearflag; Thanks for checking your notes, Max. )
Oddly, most mail-in deposit forms that I’ve seen recommend the “Pay to the Order of Third National Bank” endorsement. That doesn’t make sense to me, either.
:foil: Follow up question: How often are people’s bank accounts raided by criminals? I’m wondering whether somebody with my bank account and social security number could easily tap into my funds. :foil:
As a related question…
Lets say a friend of mine wrote me a check for $10,000, and I deposit it into my account with the “without recourse” endorsement. My friend then stops payment on the check. Does this mean the bank has no recourse, and they are legally prevented from removing the funds from my account?
Well, here’s the deal in UCC 3-415.
“(a) Subject to subsections (b), ©, and (d) and to Section 3-419(d), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section.”
Of course, subsection (b) says:
“(b) If an indorsement states that it is made “without recourse” or otherwise disclaims liability of the indorser, the indorser is not liable under subsection (a) to pay the instrument.”
Basically, if you endorse a check for $10,000, you’re making a warranty that you’re handing the person $10,000. If the check is later dishonored and the person you handed it to finds himself out of luck, he has the option of going after you, the endorser, as well as the person who originally wrote the check. The “without recourse” language means that you are not liable on the instrument. (Note that this does not necessarily mean that you are no longer responsible for the debt!)
But this really only applies to transactions between people. Banks have their own special rules. In your example, assuming the stop payment order was timely and proper, the check is stopped and you get no money. You’ll have to go after your friend to get the cash.
You should probably read the fine print on your account agreement. In general, when the bank increments your account on a deposit, it is a ‘provisional credit’, subject to their collection of the amount of the check. This is technically not an available balance, although (depending on the details of your account contract) they may treat it as such for certain purposes. This is technically an interest-free loan …
Eh. I always just sign 'em and let it go at that.
I know this is an old thread, but I’m hoping someone might still be listening. Please tell me more about this. If the check is endorsed as “For Deposit Only” with the account number, wouldn’t that prevent anyone from doing anything with it, other than depositing it to your account? I am trying to understand why it would be preferable not to endorse the check until just before depositing it.
Thanks!
Wow that’s one dead zombie.
“Endorsing” just means you write your signature on the little line on the back. No dates, “for deposit only” account numbers, or other hogwash required.
With that signature, that means that whoever has the check can do whatever they want with it, just like it were any other form of paper money - your signature means you’re honoring that amount written on the check.
That’s why the bankers and law peoples are saying it’s much safer to do something more like:
For deposit only into
xxxxxxxxx (acct #)
DATE
SIGNATURE
That way even if someone else gets hold of the check, the teller SHOULD notice the acct number on the check, and make sure it goes to YOUR account, and not the other guy’s account. On the other hand, everyone makes mistakes, so it’s better not to write ANYTHING on it until you’re ready to hand it directly to the teller, to minimize chances of loss or theft.
Why do you think they always keep that collection of pens right there?
Now explain how I can get rid of my debt by writing a check for $1 and putting “Paid in full” on the memo line and signing it saint cad, sov. cit.?
Just kidding.