As you navigate the world of personal finance, you may be asked to accept a third-party check. A payment is considered a third-party check if the account holder wrote it to someone else who then transferred it to you. These checks are not as easy to cash as regular checks because they need additional verification to prevent fraud.
Third-Party Check Risks
Many banks and credit unions are reluctant to cash third-party checks, even to their own account holders, because they need to verify that the original payee intended for you to have their business or personal check.
If a payee endorses a check and misplaces it, it's easy for anyone who finds it to endorse it to themself and attempt to cash it. The bank would be liable for the money if the payee or payer disputes it and the check bounces.
Even if the FAQs page of a financial institution shows that third-party checks are accepted, play it safe and verify the bank policy for such checks at your local branch.
Where to Cash a Third-Party Check
The odds of walking into a national bank or local credit union as a non-account-holder and cashing a third-party personal check are slim, unless you go to the issuing bank, where the original payee has an checking account. The most likely place for a smooth transaction is your own bank, where you have a savings account or checking account balance sufficient to cover the amount of the check.
Whether the transaction is for a personal account or business account, most credit unions and major national banks, such as Wells Fargo, Chase Bank, Citibank, U.S. Bank and Bank of America will require you to do everything you can to provide proof that the check isn't fraudulent. Be prepared to wait several business days and pay a processing fee.
Even if the FAQs page of a financial institution shows that third-party checks are accepted, play it safe and verify the bank policy for such checks at your local branch.
What About Check Cashing Services?
An alternative to the local bank may be a stand-alone check-cashing store or a check cashing place in a retail or grocery store. These businesses charge a fee for their financial services, and while most can handle almost any type of two-party check, many will not deal with a check that is signed over to someone else.
Walmart MoneyCenter and Kroger Money Services generally do not cash third-party checks. Some check cashing services do make exception for government checks and business checks.
It is advised that you call ahead any time you are trying to find third-party check cashing services.
How to Cash the Check
First and foremost, wait to endorse the check until you know the bank will accept it and if signatures must be done in front of a teller. Otherwise, your check may be void.
The payee must sign the back of the check above the endorsement line and write "Pay to the order of" and your name underneath. You will sign under this line.
Both parties must present a legal photo ID, such as a driver's license or state identification card. The names on the IDs must match those on the back and front of the check. The teller will verify and may even contact the issuer to ensure there are sufficient funds in the account.
Some banks charge a fee for cashing checks if you are a non-account-holder.
Depositing the Check
While third-party check cashing is tricky, your bank may accept a check deposit. If so, the process is fairly simple.
Sign it and present your photo ID in person. In some cases, depending on your account balance and what type of check you are presenting, a bank must make some of your deposit available by the next day, according to the Federal Reserve Board.
The bank can put a hold on the rest until the issuing bank pays the full check amount. If the payer or payee disputes it within this time, your bank will take the money from your account, which is another reason some banks don't provide this service for non-customers.
Commonly Asked Check Questions
Can I Cash or Deposit a Third-Party Check Through a Mobile App or Online Banking?
Most financial institutions do not allow remote deposit of third-party checks. Using an ATM or mobile app does not allow the bank to verify identities. Check cashing apps like greendot.com tend to accept only two-party checks.
What Are the Benefits of Cashing a Third-Party Check?
Cashing a third party check might be helpful if a check was intended for you but made out to the wrong payee. Or, if someone receives a check as payment, but doesn't have a bank account, you may want to cash the check at your bank in order to help them access the funds.
What Are Alternatives to Cashing a Third-Party Check?
If the person signing the check over to you has a bank account, it just might be easier for them to cash the check at their own bank and give you cash or a new check made payable to you.
If you are cashing the check for a friend or family member, you may suggest that instead of accepting a paper check, they ask for a prepaid card, money order or cashier's check to avoid future hassle. Venmo, PayPal, credit card and debit card payments are more convenient ways to accept payment or transfer funds.