A check drawn on a bank checking account, whether a personal or business account, constitutes a legal document – in effect it is a written contract between you and the bank in which you are requesting and authorizing the bank to draw money from your checking account and pay it to a third party, or to the bearer. When drawing a check it is important to do it correctly, so the payee can cash or deposit the check, thereby fulfilling the obligation you want to pay.
When you receive a check, it is important to be aware of the endorsement options you have, to cash the check, deposit it in your checking account, or transfer it to another person.
Drawing a Check
Do You Have a Sufficient Balance in Your Account?
Before drawing a check it is important to ensure that you have a sufficient balance in your account to cover the check. You should keep your checkbook register up-to-date, noting all the deposits, checks you have drawn, and other charges and credits to your account. It is important to reconcile the balance according to the bank statement you receive with the balance in your checkbook register each time you receive a statement, which is normally at least once a month.
If you rely on online information on your checking account through the bank’s website, you should still review it to ensure it is correct, that there is no charge that does not apply, and that all deposits and checks you have drawn are correctly recorded in your account. You must take into account any checks drawn but not yet cleared, and deduct them from the balance that appears in your account online in order to determine the balance you actually have available to cover the check before you issue it. Any outstanding checks could clear in the meantime, leaving you with a balance that may not be sufficient to cover the check you are issuing now.
It could be that you have overdraft protection on your checking account, which is an arrangement by which the bank will honor a check when there is an insufficient balance in your checking account. These overdrafts are recorded as a credit that you can pay later, or that are applied against your checking account later, when you have a balance sufficient to cover them.
You should take into account that an overdraft line of credit normally has a cost, in the form of a bank charge or commission, plus accrued interest. If you do not have overdraft protection, there can be a significant charge for non-sufficient funds (NSF) checks. In addition, drawing a check without sufficient funds can result in legal problems in some cases, with a negative effect on your credit rating.
How to Write a Check
Write the check in ink, so it cannot be altered. Pens with gel ink seem to be recommended because it is more difficult for a potential fraudster to alter the amount or the payee with liquids used to ‘wash’ what is written on the check. Write clearly so there is no doubt regarding any of the information indicated on the check.
Note the date in the space indicated on the upper right portion of the check. It must be the date you write the check, or a previous date, but not a future date. While ‘future-dated checks’ may be a common commercial practice accepted in certain places, they do not guarantee that the check will not be cashed prior to that date. A check with a future date can be cashed or deposited at any time.
In the space “Pay to the order of”, write the name of the person, company, or organization you want to pay. After the name, draw a line through the rest of the space so that another person cannot add an additional name. You should be careful about leaving this space blank – any person could cash the check.
Write the amount in figures in the box indicated, in dollars and cents, for example 53.84. You should start writing the amount as close as possible to the dollar sign, to prevent an additional figure from being added before the amount you indicate. Then write the amount in words on the line indicated, such as “fifty three and 84/100”. You should draw a line after the amount through the end of the space, to avoid any additional amount from being added.
At the bottom left of the check, there is a space called “Memo” or “For”. This space is optional and can be used for any notation you may want to make to identify the payment, such as the account number of a bill you are paying, an invoice number, or any other reference.
Sign the check on the line at the bottom right of the check. You must always use the same signature.
Once you have written the check, note the check number, date, payee, and amount in your checkbook register.
If you make a minor error in writing the check, you can cross out the incorrect information and write your initials above. Then write the correct information. But since in many cases checks with corrections are not accepted, the surest way is to void the check and write a new one. To void the check write “VOID” diagonally across the entire check, or simply tear up the check. If you tear it up, take it with you. Do not leave the pieces in the business or other place where you are writing the check. Someone could reconstruct it and take your name, address, and account number.
How to Write a Check to Be Cashed
You can draw a check to take cash out of your checking account. Write “Cash” or your own name on the line “Pay to the order of”. Then sign the back of the check when you present it to the cashier to cash it. You should be careful with checks made out to “Cash” because anyone can endorse and cash them. In this case it is better to write the check in the bank or other place where you are going to cash it, and endorse it only when you get to the cashier.
Other Information that Appears on a Check
Checks come with preprinted information. On the bottom left hand part of the check there is a nine-digit “ABA” or “routing number” that identifies the bank, followed by the account number. You need these two numbers in order to give instructions for a wire transfer of funds from or to your checking account.
Checks also come preprinted with the name of the bank and branch, as well as your name as the account holder, your address, and sometimes your telephone number. When you open the account the bank will ask you for the information you want preprinted on your checks.
Endorsing a Check
Endorsing a check means signing the top portion of the back of the check where it says “Endorse here”, to cash the check, deposit it, or transfer it to another person. You should follow the instruction that says “Do not write, stamp or sign below this line”. The space below is for the bank’s use. The endorsement is an essential aspect and when done incorrectly can cause the check to be returned, without being able to deposit or cash it.
There are different types of endorsements, including open, restrictive, and special endorsements.
Open Endorsement
For an open endorsement, you simply sign your name on the back just as it appears on the front of the check. If your name is written incorrectly on the check, sign your name on the back as it appears on the check, and below that place your correct signature. You should note that the bank may refuse to cash or deposit the check if the name that appears on the check does not correspond to your name according to your identification, such as your driver’s license. Therefore, before accepting a check it is important to verify that your name is written correctly.
It is important not to do an open endorsement of a check until you are in the bank or other place where you are going to cash it. Once a check is endorsed with an open endorsement, any person can cash it.
Restrictive Endorsement
A safer way to endorse a check is for deposit into your account. This is the recommended way if you are mailing your check for deposit, or are sending the check with another person to deposit it.
Before signing the back of the check, write “For deposit only” and below that your account number, or “For deposit to account number …”. Below that, sign your name. With this endorsement, the check can only be deposited in your bank account.
Special Endorsement
If you want to hand the check over to another person, write “Pay to the order of” in the endorsement section on the back of the check and below that, the name of the person to whom you want to hand over the check. Then sign your name below the name of the other person. With this endorsement, the other person can cash or deposit the check by signing the back of the check below your signature.
When a Check is Issued to More than One Person
A check could be issued to one person “or” another person, or to one person “and” another person, for example: Pay to the order of “John Smith or Mary Jones. In this case either of the persons can endorse and cash or deposit the check. If the check is made out to the order of “John Smith and Mary Jones”, both persons have to endorse the check before it can be cashed or deposited.
When a check is made out to one or more persons and a financial institution, which could be the case with a check from an insurance company, for example: Pay to the order of “John Smith, Mary Jones & ABC Mortgage Co.”, both persons must endorse the check, and a representative from the financial institution (ABC Mortgage Co. in this example) must also endorse it, with the institution’s data, which would normally be on a stamp.
This could occur when you receive reimbursement from an insurance company for damages to property subject to a mortgage loan guaranteed by the property itself.
Checks Payable to a Minor
A check made out to a minor who cannot endorse it can be endorsed by the minor’s parent or guardian. The parent or guardian must sign the check in the endorsement section on the back of the check and below the signature write “Parent/Guardian of (Name of the minor), Minor”.
Checks Payable to the Name of Your Business
To endorse these checks, in the endorsement section on the back of the check you must note the name of the business, your name and your relationship to the business, for example “Owner”, and then “For deposit only” and the number of the business’s checking account, for example:
Smith Construction
John Smith
Owner
For deposit only
ABC Bank
Account No.
In practice, many businesses use a stamp for this purpose.
Reference:
- Alabama Cooperative Extension System – Writing a Check: www.aces.edu
