Federal regulations define cashier's checks as next-day availability items, which means that these checks are cash equivalents and not subject to holds. A third-party cashier's check involves a third party beyond the person negotiating it and the bank that cashes it. Due to high levels of fraud involving cashier's checks, banks do not allow nonaccount holders to cash third-party checks. However, you can usually cash a third-party cashier's check at your own bank as long as the amount of the check does not exceed your average account balance.
Contact your bank, and find out whether you can cash a third-party check by yourself. Some banks require the original check payee to go with you to the bank when you cash the item. People who do not have bank accounts often cash checks against friends' accounts in order to avoid check-cashing fees.
Tell the bank representative the dollar amount of the check, and find out if you can cash it based upon your account relationship. Additionally, if you have a check in excess of $5,000, your bank may require advance notice because banks do not normally keep excess cash on hand to cover large-dollar checks. Therefore, if necessary, ask the bank to order the funds to cash your check and agree to a time to cash it.
Go to the bank. If the bank required the check payee to go with you to cash the check, ask the payee to endorse the check in front of the teller. If the payee did not go with you to the bank, then you must have the payee endorse the check before you go. This involves the payee signing the check, writing "pay to the order of" and then printing your name.
Sign your name under the payee's endorsement, and hand it to the teller along with a form of government-issued identification. If the payee went with you to the bank, then he must also present a form of government-issued ID to the teller. Count the money before you leave the bank.
Generally, checks become stale dated after six months, which means that banks can refuse to honor the checks. However, cashier’s checks never become stale dated or expire, but state laws require banks to surrender funds kept on hand for outstanding checks to the state after a certain number of years due to abandoned property laws. When a bank surrenders the funds to the state, you can only negotiate the check by surrendering it to the state directly.
If your bank does not allow you to cash third-party checks, you can try to deposit it or return it to the payee, and the payee can try and cash it at the bank that issued the check.
When you cash someone else’s check against your own account, you take full responsibility for that item. If the check gets returned unpaid to your bank, then your bank can debit your account for the money that you received even if this causes your account to go to the negative. While you can pursue the check payee in court for the lost funds, you and not the check payee have the responsibility for bringing your bank account back into the positive.
- BankingQuestions.com; Cashing a Third-Party Check; May 2008
- Answers & Solutions for Customers of National Banks: Answers About Cashing Checks
- BankersOnline.com; Third-Party Cashier’s Check Cashing; Ken Golliher; March 2010
- Answers & Solutions for Customers of National Banks: Forgery and Fraud