What does it mean to endorse a check?
A check is a document that contains a money order for a specified amount of money. When a check is endorsed, the amount indicated on the check is transferred to a third person. According to the Dictionary of the Royal Spanish Academy (RAE), to endorse means “to assign in favor of someone a bill of exchange or other credit document issued to the order, thus stating it on the back or back.” Endorsed checks are subject to the Tax on Property Transfers and Documented Legal Acts.
You can check out our article on How to Write a Cheque for detailed information about writing cheques.
Steps to endorse a check
To correctly endorse a check, it is necessary to follow a series of steps. The beneficiary, known as the endorser and who has the check-in her possession, must sign it on the back to make her assignment official.
If you only sign and do not specify the name of the endorser, that is, of the person to whom you make the check, it will be a blank endorsement.
If instead, it indicates the name of the endorser, it will be this person who will be able to cash the check. In this case, it is necessary to indicate names and surnames and other identification data such as the DNI.
The endorsement is always made for the total of the check. In addition, new beneficiaries may endorse the check again as set out in Law 19/1985, of July 16, Exchange, and Check.
For a check to be considered as such, it must have written the word check, the mandate to pay the specified amount, and the name of the person who must pay, which will necessarily be a bank.
Likewise, the place of payment, the date, and place of issuance of the check and the signature of the person who issues it must be stated.
What checks can be endorsed?
Not all checks can be endorsed. The most widely used types of checks are bearer checks and nominal checks. The name of the person to whom it is addressed is not specified in a bearer check, that is, it can be cashed by anyone who presents it to the bank.
For its part, the name of the beneficiary appears on a nominative check, which may be physical or legal. To endorse a nominal check, it must be written “to order”, or nothing specified must appear. The only case in which it cannot be endorsed is when the clause “not to order” appears after the name of the beneficiary.
Endorsing a check is therefore a simple process that will allow a third party to collect the amount indicated in the document.
Reasons not to issue a blank check
Despite this advantage, writing blank checks can lead to many problems and become a high-risk payment method.
Do not write a blank check if you do not have full confidence
By issuing blank checks, the document is granted to a third party. This person is supposed to be highly trustworthy, as it will be she who fills in the amount to be paid in this type of check.
If you do not trust that person, it is not advisable to write the blank check, since you could write an amount of money that does not comply at all with what was established during the transaction or what was agreed in a negotiation.
Also, if the person is not trustworthy, they may cash the check for themselves and receive in their account an amount of money that is not due or has not been agreed.
Ignorance of the amount
If the holder issues blank checks, it means that they know approximately the amount to be paid but not the exact amount. Therefore, it is advisable not to write the check if the amount of money to be paid is completely unknown.
In addition, the account of the holder must contain sufficient funds to meet the payment, and if the approximate amount is unknown, the third person may write a number that the account does not have.
If you are the holder of the checks and you are confused, do not write blank checks. In the event that you lose the signed check or the complete checkbook on the street or in the office, someone can find them and fill in any amount they want. Thus, she would receive money that does not correspond to her.
Checks with errors
Do not issue a blank check if it contains errors. For example, even if you have sufficient funds in the account but the payment date is incorrect, you may run into the problem of paying on a date that does not correspond to the planned date.
In this case, if the payment should be made after a funds transfer has been made to the account linked to the checks and a check is issued with an earlier date, the beneficiary may not cash the check for lack of funds, or cash it but generate commissions by the bank, which would cost you significant sums of money and could increase the expense of your company.
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In conclusion, avoid issuing blank checks as the risks are quite high. Do not make this type of payment if you do not have enough funds in your account, you do not know the approximate amount and you are a clueless person. We recommend that you check your checks or financial documents well, that they do not contain errors, and that they do not have your signature. Use checks only at the time of payment for a transaction.