Cashing third-party checks, explained

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.

What is 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.

Types of third-party checks

There are a few different types of third-party checks:

• Personal checks: Checks written from the payer’s personal bank account.
• Cashier's checks: Checks signed and guaranteed by the bank where the payer has an account.
• Certified checks: Checks signed from the payer’s personal bank account, which the bank certifies.

How to endorse 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:

1. Sign the “Endorse Here” or “Endorsement” designated area on the back of the check.
2. Below the signature, write “Pay to the order of” and the third party's name — abbreviations should not be used.
3. Ensure the check's endorsement area is not marked through or otherwise obscured.
4. Hand the check over to the third party.

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.

Where to cash a third-party check

Some common places that cash third-party checks may include:

• Banks and credit unions. Many financial institutions accept third-party checks from account holders. The issuing bank of the check will often cash the check for non-account holders as well, though they may charge a fee to do so.
• Check-cashing stores. Check-cashing stores may be convenient but often charge high fees, typically a percentage of the check amount.

How to cash a third-party check

Here are the typical steps one would take to cash a third-party check:

1. Verify that the original payee has properly endorsed the check.
2. Check that the chosen check-cashing location accepts third-party checks.
3. Visit the check-cashing location.
4. Present a valid government-issued photo ID for identification.
5. Pay any applicable fees.

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.