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Checks are a popular payment method among workers and companies that handle large amounts of money.
But when you receive a check, cashing it isn't your only option. Checks can also be endorsed and transferred to a third party. Do you know what that involves? Keep reading to learn more about this option.
What is endorsing a check?
**Endorsing a check** is an action taken to transfer a check to someone else. In other words, it serves to assign that payment order to a third party, who then becomes the new beneficiary or endorsee of the check.
An endorsement is a signature placed on the back of the check by the person issuing it. However, this can only be done with checks that have been made out to order or to the bearer.
If the check carries a "non-negotiable" or "not to order" clause, it cannot be endorsed.
How do you endorse a check?
To endorse a check, the person transferring it must follow these steps:
- Write the name of the new beneficiary on the back of the check,
- **Sign** below it,
- Legal entities must include the phrase **"by power of attorney" or "p.p."**
Depending on the country, other information may be required, such as the new beneficiary's identification number or official document number, and their address.
How many types of check endorsements are there?
There are five types of endorsements, which are:
- Blank: the endorsement consists only of the signature.
- Bearer: instead of writing the beneficiary's name, "to the bearer" is written. This check can be cashed by anyone who possesses it.
- To order or nominal: the beneficiary's name is written. Only that person can cash it.
- For collection: includes the clause "for collection." It gives the endorsee the authority to present the check for judicial or extrajudicial collection.
- As collateral: constitutes a real right of pledge. It carries the clauses "as collateral" or "as a pledge."
What happens if I make a mistake when endorsing a check?
If the person endorsing the check makes a mistake, the bank will reject it. In this case, a new check must be issued.
However, if it is a spelling error, it can be fixed by adding a clarification. This is done by writing the word "I mean" followed by the correctly written phrase, with a signature below the clarification.
How many times can a check be endorsed?
Although there are legally no restrictions in Mexico that prevent a check from being endorsed multiple times, individual banks may require certain conditions to be met for multiple endorsements. The same applies in the United States.
Additionally, keep in mind that endorsing a check multiple times increases the risk of loss or theft.
The case for Echeqs may be different, so it is recommended to check the information on the official websites of each banking or financial institution.
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