Endorsing a Cheque

When you receive your payment via cheque from someone, in order to either cash or deposit your cheque, you’ll need to endorse it. Here endorsing a cheque means – signing on the back side of the cheque along with mentioning any other information that is necessary on how the cheque needs to be processed.

Mostly, when you endorse a cheque, your signature is the only thing that is mandatory. However, when you mention additional details, you can control the way your cheque payment is handled. By endorsing your cheque, you’re authorising the bank to process your cheque.

Ways to Endorse a Cheque

Endorsing a cheque with a signature

  • You’ll need to add your signature on one of the grey lines on the back side of the cheque.
  • Ensure your name on the signature and your name on the front side of the cheque match (even if the cheque issuer has abbreviated or misspelt your name).

Endorsing for deposit only

  • If you intend to deposit your cheque, mention “For deposit only” on the top-most endorsement line. Key in the name of the concerned bank and the bank account number on the line provided just beneath your signature.

Endorsing for transfer to another person

  • When a cheque is addressed to you, only you’ll have the authority to use the cheque in a way you want to. However, in case you neither want to encash nor deposit the cheque, you can choose to sign over your cheque to a third party.
  • When you sign over your cheque to someone else, it’s called as a third party cheque. Before you consider this option, you need to consult with the concerned banks to check on their policy on third-party cheques.
  • Mostly, banks do not accept this kind of an endorsement as sometimes this way of endorsing a cheque can be used for activities of fraudulent nature.
  • In order to use this endorsement option, both, the cheque writer’s bank as well as the bank at which the cheque will be deposited, need to accept cheques that are endorsed in this manner.
  • In order to sign your cheque to a third party you need to follow a few steps given below:
    • On the top section of the endorsement area, write “Pay to the Order of” and write the name of the person you intend to sign over the cheque to.
    • Make sure you’ve written the name legibly and spelt it correctly. Ensure the name of the person matches as per how his or her name appears in the government records.
    • Since you’re endorsing your cheque to a third party you’ll still remain the original payee of the cheque. Hence, you need to sign in the section “Payee’s signature/endorsement”.
    • Ensure there is enough space after your signature because the person you intend to pay will also have to sign the cheque after you.
    • At this stage, the responsibility to get the cheque processed will be with the person you’ve signed over your cheque to.
    • Most banks are vigilant about third-party cheques. Sometimes they might want to seek your approval before accepting the cheque.
    • A few banks might also contact you in order to receive confirmation from your end that you’ve initiated to sign over your cheque to the concerned person.
    • If the cheque you’ve signed over for someone else is for a huge amount, you might be asked to visit the bank with the concerned person too.

Endorsing a business cheque

When you operate a business and receive a payment via cheque, the way you endorse a cheque is a bit different. Though the cheque is payable to the business and not to you as a person, you will still need to sign on the cheque on behalf of the company. Also, you must have the authority to handle the funds of the company.

Let’s see how to endorse a business cheque step-by-step:

  • On the back side of the cheque, there is a section called “Endorse Here”. Use this section to mention the business name. Ensure the business name is the same as the payee name that is mentioned on the front side of the cheque.
  • You’ll need to put your signature (your name).
  • Mention your title (owner, treasurer, president, etc.).
  • Include any additional restrictions, if needed.

What to do when you need to endorse business cheques in large numbers?

  • When your business receives most of its payments via cheque, endorsing cheques in huge numbers on a daily basis can be quite a daunting task for you.
  • In such a scenario, your business cheque can be endorsed via a stamp. With the help of office supply stores and digital cheque printers, you can get a stamp done via which your business cheques can be endorsed much faster.
  • Before placing an order for a stamp, make it a point to consult with your bank to know if there are any specific requirements that need to be there on the stamp. When you comply with the bank’s specific instructions, you can prevent delays in your cheque payments being processed.

What Exactly is a Restrictive Endorsement?

Upon endorsing a cheque, you’re authorising a person to receive the amount that is mentioned on the cheque. But if a cheque is stolen or lost post to being endorsed, it is possible that an unauthorised party can encash or deposit the cheque to another account versus the intended bank account. This is when a restrictive endorsement plays an important role.

With the help of a restrictive endorsement, you’ll be able to limit the risk that is involved in how your cheque is processed after your endorsement.

  • Let’s take an example of how to avoid your cheque from being encashed. The commonly used restriction is to mention “For deposit only to account 56789”, with this restriction funds will only get deposited to the account number specified by you.
  • You can consider including your bank account details. A few banks will insist that you include the bank account number to which your cheque amount needs to be deposited. Even though the inclusion of bank account details are not mandatory, when you’ve two bank accounts (current or a savings account) with the same bank, it helps.
  • After including restrictions to your endorsement, you need to put your signature below your restrictions. Also note, your restrictions will be effective only when you sign below it. If you put your signature above your restrictions, they will be considered invalid.
  • After completing a restrictive endorsement, your cheque can be deposited at any given point of time. The concerned bank will not process your cheque for anyone else apart from you.

No Endorsement

It is not compulsory to always endorse your cheque. A few banks permit cheque deposits without your signature, account details, or any other information on the back side of the cheque. When you choose to not endorse your cheque, your information will remain confidential.

Without an endorsement, no one can view your account details or signature unless and until the concerned bank adds your account number details when your cheque is being processed.

For security reasons, in the endorsement area you can choose to add “For deposit only”. This comment will not be considered as an endorsement. Most credit unions and banks will refuse to encash such cheques.

Whose Signature is Required to Endorse a Cheque?

Mostly, the person who receives your cheque has to endorse it. As a cheque writer, you would have signed on the front side of the cheque already.

  • When a cheque is payable to someone else in addition to you, endorsing a cheque will vary depending on how the cheque is written. Words “or” and “and” between the names will decide as to how to endorse a cheque.
    • If the word “and” is written between the names, all the names that are mentioned on the cheque must put their signatures.
    • If the word “or” is written between the names, either of the payees will need to put their signature (in most cases).
  • When a cheque is issued to one person for the benefit of (FBO) some other party, the first payee will need to endorse the FBO cheque. For instance, in a rollover transaction, a cheque is written to a retirement account custodian, here the custodian will be responsible for handling the cheque.

Is there a Need to Endorse Cheques?

  • When you endorse a cheque, you give the concerned bank the complete authority to negotiate your cheque and take necessary actions that are required on your behalf.
  • However, you can still choose to make a cheque deposit without including an endorsement except for deposits that are from an insurance organisation or some other company which needs an endorsement.
  • Most credit unions and banks accept cheques without endorsement on a regular basis.
  • It is always better to wait as long as possible to endorse a cheque with your signature. This is because in case you lose a cheque that has been endorsed, it will be easier for a third party to encash or deposit the cheque to their account. It's always recommended that you put your signature while you are at the concerned bank.

Key Things to Remember Before You Endorse a Cheque

Confirm if all the information written on the cheque is accurate

  • Check if all the details mentioned on the front side of the cheque are valid.
  • In case your cheque issuer has misspelt your name or has made any other error, it is better you return the cheque and ask him/her to issue a new cheque to you.
  • A few banks acknowledge a cheque even though there are a few changes provided the cheque writer has initiated the change along with his/her signature.
  • However, a few banks get suspicious when they receive cheques with multiple changes. Hence, it is recommended to have your cheque issuer to write a new cheque altogether when there are mistakes in the initial cheque that was issued.
  • A cheque that is legitimate will have a line towards the bottom section which will have details like the account number and the routing number. In case that specific line is missing, your concerned bank cannot go ahead with processing your cheque.

Decide on who needs to endorse the cheque

  • If the cheque has only your name in the “payee” section, only your signature will be required to encash or deposit the cheque.
  • If the cheque is written to you in addition to someone else, signatures of the concerned parties will be required based on whether an “and” or “or” has been used between the names.
  • If the cheque has symbols like “-“or a “/” or ambiguous language, neither of the people to whom the cheque was issued to can encash or deposit the cheque.
  • When a cheque is issued to you with a comment saying “care of” someone else, your signature becomes mandatory. Unless and until the cheque has your signature, the intended party cannot deposit or encash the cheque. However, if you and the intended party have a joint account, the concerned party can deposit the cheque on your behalf in the qualifying account without your signature.

Be aware of which space you need to use to include your details

  • On the back side of your cheque, you’ll be able to see 3 to 5 empty lines.
  • There is also another solid line indicating the fact that you’re not supposed to write anything beyond that line.
  • The bank will need this unused space that is located just below the endorsement section to document how your cheque was processed. Ensure your signature does not get extended into this blank space because if it happens the bank might reject your cheque.   

Ensure to sign the cheque correctly

  • For endorsing a cheque, you’ll need to put your signature (your name) using a pen (black or blue ink).
  • In case there is a mismatch on how your name appears on the cheque versus your photo ID issued by the government or per your bank account, you need to consider printing your name with the correct spelling below your signature.
  • If you are putting your signature on a business cheque, ensure to add the name of the business on the line that is provided above your name. You should also consider adding your job title to reflect the fact that you have the authority to deposit or encash the cheque that is written in the company’s name.

Encash or deposit a cheque soon after you endorse it

  • After you’ve put your signature on a cheque, it will turn into a “bearer instrument”. Your cheque can be encashed by any person who finds it. In case you’re still on your way to the bank do not put your signature on the cheque unless you reach there. You can encash your cheque by visiting the bank that has issued the cheque.
  • When you visit a bank to encash a cheque but don’t hold an account with that concerned bank, you’ll need to present a photo ID that is issued by the government. For identification purposes, you can also choose to provide your thumbprint.

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