Each bank has its own policies regarding cashing and depositing checks, but virtually every bank in the United States requires that the payee endorse a check to accept it. Because of the rising incidence of check fraud and theft, banks require checks be endorsed. In addition to the endorsement requirement, many banks may charge a check-cashing fee if the person cashing the check isn’t one of its customers.
A bank will not cash a check that is not endorsed, however, an individual can deposit a check into the payee's account without signing the check. The signature line would need the words "For Deposit Only."
Endorsement by Payee
In most circumstances, a bank requires the person named as the payee of the check to sign the check to cash it. The signature must be made on the back of the check, in the 1 1/2 inches at its left side – the side directly behind the payment information on the front side. Banks use the remaining portion of the check to track which institution handled the check. In addition to a valid endorsement from a payee, most banks will also require the payee to present identification when cashing a check. If you forget to endorse the check on accident and turn it in to the bank, the teller may return it and request the endorsement.
If the payee – or someone acting for the payee – doesn’t need to cash the check immediately, banks become slightly more lenient with endorsement requirements. A check may be deposited into the account of a payee without a signature endorsing it if the person making the deposit makes a restrictive endorsement. Most banks allow anyone to deposit a check using these endorsements – usually qualified as “For Deposit Only” on the back of the check with the payee’s name. A stamp with account information may also be used for restrictive endorsements when making a deposit.
The original payee may sign over a check to a third party, transferring payment of the instrument to the third party. To do this, the original payee must endorse the check normally, then indicate the check may be payable to the name of the third party. The secondary payee of the check must then endorse it as usual when he cashes it or deposits it. Many banks won’t cash third-party checks because of security and fraud reasons.
There are no federal laws that require that banks cash checks, so state law and institutional policies dictate how a bank handles its check-cashing procedures. Many institutions charge non-customers a convenience fee to cash checks. State law may restrict the amount a bank or other institution may charge to cash a check, although many states don't limit this practice.
Wilhelm Schnotz has worked as a freelance writer since 1998, covering arts and entertainment, culture and financial stories for a variety of consumer publications. His work has appeared in dozens of print titles, including "TV Guide" and "The Dallas Observer." Schnotz holds a Bachelor of Arts in journalism from Colorado State University.