Third-party checks can provide a way to transfer money without searching for a long-lost checkbook or making an ATM withdrawal. They also can be useful for those without bank accounts that need to cash a check.
Whether it’s to repay someone or to access cash without a bank account, third-party checks may be an option. Read on to learn how third-party checks work, check cashing requirements, and where and how to endorse and cash a third-party check.
Unlike a two-party check that involves just a payer (the person writing the check) and payee (the person the check is made out to), a third-party check involves the payee signing over or endorsing the check to a third person. The third person can then cash in the check or deposit it into their own bank account.
Once endorsed, the original check works as though it were written directly to the third party from the original payer. This may make third-party checks a convenient way to save time when payments need to change hands.
Here’s an example of how a third-party check may work: Someone writes a check to their contractor for $500, but the contractor owes the same amount to their landlord for rent. By endorsing the check to their landlord and turning it into a third-party check, the contractor lets the landlord cash in the $500 directly, saving the contractor time they otherwise would’ve spent depositing the check and writing a new one or getting cash from the ATM to handoff to their landlord.
There are a few different types of third-party checks:
While endorsing a check to a third party may seem straightforward, financial institutions have specific endorsement standards to help reduce fraud.
To endorse a check to a third party, the original payee usually needs to:
Though any check can be turned into a third-party check, financial institutions are not obligated to cash them — so it’s best practice for a third party to double-check with the bank that issued the check initially.
Some common places that cash third-party checks may include:
Here are the typical steps one would take to cash a third-party check:
Keep in mind that the original payee may need to be present and show their ID as well, depending on where the third-party check is deposited.
Learn how to cash a check online.
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