If you have a checking account, you've probably dealt with depositing checks. In general, checks are meant for the person they are written out to. When you are the payee, you're the only person that can do anything with that check.
However, sometimes you may find yourself in a situation where you need to endorse a check to someone else, or you need to deposit someone else's check into your account. Different banks and credit unions have different rules, but many banks allow this under certain conditions.
Is Depositing Someone Else's Check Into Your Account Allowed?
There may be a case in your life where a friend or family member asks you to deposit their check into your account. This could be because they are unable to deposit the check or because they want to transfer the money from the check directly with you.
In general, many banks and credit unions allow this. However, you'll want to check with your financial institution before you initiate the process. If you do not follow their specified rules, it can result in the check being voided.
Call your bank and explain that you intend to deposit a check that has been made payable to someone else. Ask what you need to have them write on the back of the check, and be sure to ask if you both need to be present to deposit it. Some banks require a form of ID from the other person so that they can validate the identity of who is signing over the check.
Having Someone Endorse a Check So You Can Deposit It In Your Account
The exact process whereby someone endorses a check so that you can deposit it into your own account may vary from bank to bank or credit union to credit union. In general, this involves the person writing your name on the back and signing the check. Every check has a specified area on it where the payee can write their name or other information.
Typically, this involves writing the phrase "Pay to the order of: Your Name" and signing their name underneath your check. Again, be sure to check with your financial institution to make sure that you are going through the process correctly.
Having Someone Endorse a Check So You Can Deposit It In Their Account
Depositing a check for someone into their own account is a bit more straightforward as it does not involve the transfer of payees.
If you can, it is a good idea to get a deposit slip from the person who wants you to deposit the check. They can write their account information on it, sign the back of their checks, and all should go smoothly at the bank. This also means you'll have a clear record of the money you deposited to give to the payee.
If you cannot get a deposit slip, you can have the payee write "For Deposit Only" on the back of their check, along with their account number, and then sign it.
Alternative Ways to Deposit a Check
If you or someone else needs to deposit a check, but you are having trouble getting to a branch, there are other hassle-free ways to solve this problem.
Many banks and credit unions offer mobile check deposits, and you can encourage your friend or family member to use this and then transfer the money directly to you once it is processed. If the financial institution does not offer mobile deposit, check and see if they offer ATM deposit.
In addition, many credit unions participate in shared branching that allows members to conduct business at other credit union locations.
Protect Your Checking Account
You should always be wary when depositing checks that are not intended for you or checks that you are not sure of the origin of into your account. If you deposit a bad check, even unknowingly, you can end up in a bad situation.
If a financial institution determines that you have deposited a bad check, you can be met with penalties. For one, you may be responsible for paying the check back to the bank. The bank can freeze your account, and in some extreme cases, even close it. If you've used the funds to pay a bill or make a car payment and the check bounces, these payments could be canceled and affect your credit score.
Overall, you want to avoid depositing checks into your own account until you are sure they are valid. You can call the bank that issued the check at their customer service line to verify that it is for a valid amount.
Click below to find out ways to protect your checking account.
How to Protect Your Checking Account
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A third-party check is a personal or business check that is signed over as payment to another person. Signing over a check can be helpful if you have a check that was written to you and you need to pay someone else with it.
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Consider your options. Because of increasing banking and identification security regulations in the United States, you will likely have difficulty finding a bank that will accept a third-party check.[1]
- If you have a banking account and can deposit or cash the check written to you, it is almost certainly going to be easier for you to do that, then write your own check (or hand the cash) to the third party.
- Signing over a check may seem like it would be more convenient (by cutting out the middleman, so to speak), but is unlikely to be so anymore.
- Look into electronic transfers of funds to your third party, either through your existing bank accounts or a service such as PayPal, if you are seeking another convenient option.
- If you: 1) have a check written to you; 2) don't have a bank account; and 3) need to pay a third party the amount of the check written to you, this is the only real scenario in which you might want to try to sign over a check. See Part III of this article for other options in this scenario.
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Confirm that the person you want to endorse the check to, the third party, will accept a signed-over check.
- Ask the person if they have used a third-party check at their bank before. This will improve your chances of success since there are no laws requiring banks to accept third-party checks.
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Confirm that the third party's bank accepts such checks and know the bank's particular procedures. If you cannot contact the person immediately but know their bank branch, you can call the bank's customer service number to inquire about special endorsements of this kind.[2]
- Ask if any special procedures are required by the bank to accept the third-party check. Some banks have enacted their own rules governing these procedures, such as requiring that both parties have accounts at the bank to ensure the funds can be transferred.
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Be prepared to go in person with the third party to their bank. Completing the signing process in person may be required by the bank and will almost certainly improve your chances of success regardless.
- Bring proper identification, especially if it is not also your bank.
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Sign the back of the check as usual, except keep your signature in the top section of the endorsement area. If there are three lines, sign the top line. This is not the time for a flamboyant "John Hancock" signature, because you will need the entire space to complete the process.[3]
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Print "Pay to the Order of" and the third party's name in the middle section (or second line) of the endorsement area. If you are pressed for space, you can try using "FBO" (For the Benefit of), but you may want to check with the bank first.[4]
- Write neatly, especially the third party's name. Check for spelling.
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Do not have the third party sign the check until it is deposited or cashed. Have the third party (the endorsee) sign the check in the bottom section (or third line) of the endorsement area. If they are not present, place an "X" to indicate where they should sign, and/or attach a friendly reminder note to the check.
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Give the check to the endorsee to deposit in their bank as usual. So long as the bank accepts the third party check, the deposit process should be exactly the same as for a check written directly to the person
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Open a bank account, deposit the check, then pay the third party. As noted, you're likely only considering signing over a check because you don't have a bank account. If it is possible for you to open an account, do so, because it will make this situation (and likely others) simpler.
- To open a checking account at a U.S. bank, you generally need to be 18 or older; provide basic information such as full name, address, contact information (phone / email), and Social Security number; and show a government-issued photo ID.[5]
- You should be able to find a no-fee checking account at one of your local banks. Also look into online banks, where free checking accounts are more typical.
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Ask the original check writer to void the check and write a new one to the third party. This is more likely to work with your Aunt Edna than a mega-corporation that sent you a rebate check, of course.
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Ask the original check writer to add "or bearer" after your name on the check (and future checks written to you). Checks with "or bearer" written following the name of the payee can be deposited or cashed (typically, depending on bank policies) by whoever presents the check.[6]
- The third party should be prepared to present identification when depositing or cashing the check, depending on the policies of the financial institution, especially if the check is for a larger amount.
- Checks written out to "cash or bearer" or just "bearer" will work similarly.
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Use a check-cashing service. You will pay a fee in return for this service, but you will walk out with cash that you can use to pay your third party.
- Check-cashing charges generally range somewhere between 1% and 12% of the check amount, so shopping around for the best deal can pay off. Some national retailers, including Walmart, provide this service.[7]
- You will need a photo ID to cash the check.
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Where can I cash my third party check?
Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.
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Most banks do not accept third-party checks for cash since they have no way of knowing if the original signature is valid. However, your personal bank might accept it as a deposit and hold the funds until the check clears. For this reason, it is generally better to avoid third-party checks.
Question
How do I deposit a check from the liquidation of a UTMA stock account to a 529 college fund?
Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.
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Assuming that you are the Payee on the check remitted by the minor's stock account custodian, simply endorse the check on the back with instructions to "Pay to the Order of . . . " (deposit the funds into) the college account. Be aware that some custodians might not accept a third-party check.
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You will not have proof of receipt of the check in your bank account. Since the check was originally written to you, you may want to copy the check as proof of receipt before signing it over.
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Third-party checks can be a target for various types of scams, so only become a party in a third-party check signing with someone you know and trust.
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Article SummaryX
If you need to sign over a check, first you need to make sure that the other party’s bank will accept a third-party check. Ask the person if they have cashed a third-party check before, or call the bank to ask if they will accept it. Then, sign the back of the check as usual. Beneath your signature, print “Pay to the order of” and the third party’s name. The third party will sign the check when it is cashed. Keep reading for alternatives to using a third-party check!
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