How To Sign Over A Check The Right Way

Some people may not know that they can sign a check over to someone else when it’s been made out to them. In fact, this is a very common practice. There are many reasons you may want to do this. Today we will discuss common reasons people sign checks over, the correct steps to take, things to be aware of during the process, and everything else you need to know.

Why Would You Want To Sign A Check Over?

There are essentially 3 common reasons people sign checks over to someone else. The reasons are:

  • You may owe someone money and not have enough cash on hand. Instead of going somewhere to cash a check you already have you can simply sign it over to the person you owe money. 
  • You received a check in error. If you know the person and inadvertently ended up with their check, you can simply sign it over to them. This is a much easier process than waiting for the issuer to cancel the original check and write another. 
  • You received a check but don’t have a bank account or nearby branch. Signing the check over to a family member or friend to cash at their bank will prevent you from paying fees at a check cashing store. 

How To Correctly Sign A Check Over

Just like anything else, when signing a check over to a third party, there’s a proper process you’ll need to follow. 

The first thing you always do with a check that’s ready for cashing or deposit is sign, or endorse, the back of it. After you sign it, you’ll notice a small area under your signature line for “notes”. In this portion you’ll need to write “Pay to the order of:” and then write that person’s name. Your signature, along with that short message, shows that you are waiving all rights to the check and transferring it to the specified person. 

Just beware that it’s now up the banks if they will honor the check or not. 

Do Banks Allow This Process?

The answer to this question is – it depends. Some banks may not accept checks that are signed over to third parties. Although, the process is completely legal, banks are not required to do it. Some banks even have policies against the practice. So, before you endorse the check have the other person ask their bank if they’ll accept it. 

Checking before endorsing will prevent future headaches if you decide to try cashing it at a different place. The additional names and signatures on the back will not only create confusion, but it could also lead to delays. 

The bank is basically giving money due to you to someone else when this approach is used. Unfortunately, in some situations banks find this too great of a risk and won’t accept. This is especially true when they have no way of verifying your signature or identity. When this happens the bank has to simply take the third party’s word at face value.  

Skip The ATM

If you know how to sign a check over to someone, you might be able to avoid going to the ATM. But it's not always worth it.

When signing a check over to someone else, or accepting one that’s been signed over to you it’s best to skip the ATM. Even though almost every ATM accepts check deposits it’s a bad idea to deposit one that you can’t guarantee will clear. 

These machines are automated and great for handling regular check transactions. However, a check that’s been signed over is far from a standard transaction. While the person’s bank may accept this transaction via an ATM, it’s not something you should risk. The best practice is to go to a branch and speak with a teller. This person will be able to tell you if the bank will accept it or not. 

Beware of Check Cashing Scams

Anytime checks are involved you should always beware of check cashing scams. This is especially true when accepting a check that’s been signed over to you. Keep in mind that when you sign your name on the back of any check you are also assuming responsibility for the legitimacy of the document. When checks are deposited and later returned as “unpaid” you will more than likely be charged a fee for a returned item. 

Also, since checks go to the Federal Reserve for clearance the process can take longer than you think. So, it may actually take a week or two for the bank to receive their money from the issuing bank. However, the simple fact is you’ll have full access to the money much quicker than that. So, beware of spending the funds if you don’t keep excess money in your account. When the bank finds out that the issuing bank is refusing to pay, your bank will take the amount of the check from your bank account. If this withdrawal brings you to a negative balance you’ll owe your bank the amount of the check and additional fees, and it’s important to do all you can to avoid bank fees

In conclusion, it’s best to do some research before signing a check over to someone else. While there are many banks that will accept this practice, there are others that won’t. To save yourself headaches be sure to contact the third party’s bank before you even sign the check over. If their bank won’t accept the transaction you will have to choose a different way to deal with the situation.