For deposit only endorsement definition
/What is the For Deposit Only Endorsement?
The "for deposit only" endorsement is added to the back of a check in order to restrict the payment of the check to the endorser. An even more restrictive endorsement is to write the name of the account number into which the funds are to be deposited, such as "for deposit only to account 1234-123," which requires the funds to be deposited into the specified account. Writing this type of wording onto the back of a check ensures that funds cannot be diverted elsewhere. For example, if a person were to just sign her name in the endorsement block on the back of a check, the check is still considered a bearer instrument, which means that anyone having possession of the check can cash it.
When to Use the For Deposit Only Endorsement
It is most important to use the "for deposit only" endorsement when a check will be out of the physical control of the payee for a period of time, such as when the check is being mailed to a bank for deposit. Conversely, if the payee is hand-carrying the check to a bank, there is less need to use this restrictive endorsement, since there is less risk that anyone will intercept the check. Nonetheless it is good practice to always use this endorsement to reduce the risk of loss.
Types of Endorsement
The following are all forms of check endorsement:
Blank endorsement. Simply sign your name. This is the most common but also the least secure because anyone can cash or deposit the check once it's endorsed.
Restrictive endorsement. Write “For Deposit Only” followed by your bank account number, then sign your name. This limits the check to deposit only into your account, adding security.
Special endorsement. Write “Pay to the Order of [New Recipient’s Name],” then sign your name. This transfers the check to another person or entity.
Conditional endorsement. Write a condition (e.g., “Payable upon completion of X”), then sign your name. This is less common and may not be accepted by all banks.
Business endorsement. For business checks, sign using the business name as it appears on the check, often adding a title (e.g., “John Doe, Treasurer”).