6 Options For Endorsing Checks

Banking institutions require recipients of checks to endorse the bank note before it is cashed or deposited to their account, which is why it is important to know the different options for endorsing checks. This is required for both personal and business checks. By definition, a check endorsement refers to the placement of the signature in the front or back of a bank check as a form of acknowledgement from both parties that an agreement for the exchange of a specific amount has been reached.

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The options for endorsing checks allows the checking account holder to limit who is qualified to receive the specific amount in the bank check or how the amount can be disbursed by the payee bank. In general, checks are considered as negotiable instruments for the transfer of money from a remitter to a payee. In some instances checks are used as a means of guaranteeing or promising payment for specific considerations. The different options that can be considered when endorsing checks can be:

Basic endorsement.

In terms of banking, a basic endorsement relates to the fact that anyone in possession of the bank check can cash it with the payee bank. This means that it is not just the signer who has the right to the specified amount written on the paper check. Basic endorsement entails signing directly underneath the endorsement line to initiate payment processing. Normally checks under this nature are payable to cash instead of a particular entity.

Blank endorsement.

This is perhaps one of the most common options for endorsing checks. With this option, the payee simply signs at the back of the bank check and proceeds to present it either for encashment or deposit. Ironic as it may sound, but the process is referred to as blank endorsement primarily because there are no specific or additional instruction as well as limitations applied on the bank check.

This is the reason why the recipient has a free hand on what should be done with the specified amount. With this type of bank check endorsement, the signature is only affixed once the recipient is prepared to cash or deposit the bank check. The signature should match that shown in front of the check. Any discrepancies like a misspelled name or amount would require a countersignature.

Once the bank check has been endorsed, practically anyone can cash or deposit it. Once the recipient has signed at the back and everything is satisfactory, it becomes equivalent to cash.

Restrictive endorsement.

Among the options for endorsing checks, this is perhaps considered as one of the safest. Basically, instead of signing the name of the recipient on the endorsement line, the phrase “For deposit only” is written on the back of the check. This practice is referred to as restrictive endorsement primarily because it explicitly declares the provisions covering the bank check.

By limiting the option for the transaction to merely deposit, it cannot be cashed or passed on as payment to another person. It is likewise possible to present the check directly for deposit without having to provide an endorsement. The depositing bank will merely put a mark on the check with its own stamp. The verbiage may vary from bank to bank, but will read something similar to “Pay to the account credited within” followed by the name of the bank.

This marking is equivalent to writing the phrase “For deposit only” on the bank check. The bank would of course require the bank account number to be stated on the bank check. This is the most preferred option when checks are sent by mail or someone is tasked to handle the deposit process. The normal processing days for check deposit will apply.

Special or Full Endorsement.

Normally, special or full endorsement is resorted to when the payee intends to give the bank check to a person who is not named by the remitter. In terms of options for endorsing checks, the payee should first endorse the bank check and then legibly write “Pay to the order of” followed by the name of the actual recipient of the bank check. The new payee will then be required to endorse the check before presenting it for payment to the bank.

Because of the inherent risks associated with transferring checks to another party, the paying financial institution normally has the discretion on whether or not to recognize the check as well as how to deal with it. This is the reason why this practice is not as popular, but it does not mean that it is not used.

The most common condition that this type of endorsement takes place is when there is an existing agreement that whatever amount the payee receives will be turned over to the third party without necessarily involving the remitter.

Conditional Endorsement.

As the name suggests, there is a particular condition that must be met before the bank check can be cashed or deposited by the recipient. This type of endorsement is rarely recognized by payee banks for the simple reason that they do not have a way of verifying whether the condition has been satisfied. However, it still remains as a valid option for checking account holders.

Qualified Endorsement.

This type of endorsement is normally used by the issuing party in an attempt to disassociate himself from the responsibility of the check being returned if there are insufficient funds in the account. This is commonly done by writing the words “without recourse” after the signature.

This type of endorsement is almost never accepted today because of the fact that depositors are considered personally responsible for ensuring the sufficiency of funds in their accounts before issuing bank checks.

Usually when there is only one payee explicitly stated in the bank check, the right and responsibility for endorsing the bank check is reserved only for that payee. When more than one payee has been listed on the bank check, the ownership would be dependent on how the check was written by the remitter.

If the names are joined by the word “and”, all payees are required to endorse the check, but if the word “or” is used, then only one of the payees will be required to endorse it. These options for endorsing checks can be extremely useful on how you want to disburse funds properly.