Who Endorses a Check and How to Do It Correctly

Checks remain a common method for financial transactions, despite the rise of digital payment systems. Understanding the process of endorsing a check is a fundamental aspect of managing personal and business finances, preventing potential issues during deposit or cashing.

The Purpose of Endorsement

A check endorsement is a signature placed on the back of a check by the payee. This act legally transfers ownership of the funds from the check’s issuer to the recipient, granting authorization for a bank to process the payment.

Without a proper endorsement, financial institutions may refuse to process the check, leading to delays. This signature acts as a record of the transaction, providing an audit trail for both the payee and the bank.

Identifying the Legitimate Endorser

The individual or entity named as the payee on the front of the check is the legitimate endorser. This person must sign the back of the check to authorize its negotiation. If a name is misspelled on the check, the payee should endorse it with the incorrect spelling first, followed by their correct legal signature.

When someone else endorses a check on behalf of the payee, legal authorization is required. For example, an individual acting under a Power of Attorney (POA) can endorse a check for the principal. The POA agent should sign the principal’s name, followed by “by” and their own name, then indicate their POA status, such as “as Power of Attorney” or “POA.”

For checks made out to a business, an authorized representative must endorse the check on the company’s behalf. This involves writing the business name exactly as it appears on the payee line, followed by the representative’s signature and their title within the company.

Standard Endorsement Types

Different types of endorsements offer varying levels of security and control over a check’s funds. A blank endorsement is the simplest form, where the payee signs only their name on the back of the check. While convenient, this method is considered the riskiest because it makes the check payable to anyone holding it, similar to cash, increasing the risk of loss or theft.

A restrictive endorsement limits what can be done with the check. The most common example is writing “For Deposit Only” above the signature, often followed by an account number. This ensures the check can only be deposited into the specified account, preventing it from being cashed by anyone else.

A special endorsement, also known as a full endorsement, allows the payee to transfer the check to a specific third party. This is done by writing “Pay to the order of [New Payee Name]” followed by the original payee’s signature. This directs payment to the new named recipient, who then must endorse the check themselves to deposit or cash it.

Endorsing in Specific Situations

When a check is made out to multiple payees, the wording between the names determines the endorsement requirements. If the names are joined by “and” (e.g., “John AND Jane Smith”), both individuals must endorse the check. Conversely, if the names are joined by “or” (e.g., “John OR Jane Smith”), only one of the named payees needs to endorse the check.

Business checks require specific endorsement practices. An authorized individual will endorse the check by first writing the business name, then their signature, and finally their title within the organization. Adding a restrictive endorsement like “For Deposit Only” is a common practice for business checks.

For mobile deposits, banks have specific endorsement requirements. Many financial institutions require payees to write “For Mobile Deposit Only” directly below their signature in the endorsement area. Some banks may also require the bank’s name or account number to be included. This helps prevent accidental duplicate deposits and ensures the check is processed correctly through digital channels.