Cashing a Third-Party Check: What You Need to Know

Woman at ATM

Your check is considered a third-party check if the payer wrote it to someone else who subsequently transferred it to you. These checks are not as easy to cash as regular checks, because they are susceptible to fraud. Be prepared to show identification and prove that you obtained the check legally before you can cash it.

Third-Party Check Issues

Many banks are reluctant to cash third-party checks because they cannot immediately verify that the original original payee intended for you to have it, or confirm that the payer will not dispute it. If a payee endorses a check and then misplaces it, it's easy for anyone who finds it to endorse to themselves as a third party and attempt to cash it. The bank would be liable for the money if the payee or payer disputes it. You might have a better chance of cashing the check with the issuing bank. Call and verify the bank's policies about such checks before your visit.

Cashing the Check

Take the check to a branch of the bank on which the check is drawn. Arrive with the person who is signing the check over to you. The payee must sign the back of the check above the endorsement line and write "Pay to the order of" and your name underneath. Sign under this line. Both parties must present a legal form of picture identification, such as a driver's license or state identification card. The teller will provide the cash after verifying signatures and identification. Some banks charge a fee for cashing checks if you don't have an account, but provide the service free for members. You could open an account with the money if you want to avoid the fee.

Depositing the Check

Your bank may be willing to accept the check for deposit, depending on its policies on third-party checks. Some banks that accept such checks allow customers to deposit via ATM but most do not. Instead, prepare a deposit slip and take the check to a teller. Sign it and present your identification. In many cases, depositing a third party check places a mandatory hold on all but $100 -- which is available the next day according to federal banking regulations -- for up to nine days. If the payer or payee disputes it within this time, your bank will take the money out of your account.

Check Cashing Service Provider

Some check-cashing businesses accept third-party checks. Of these businesses, some only cash personal checks, rather than government or commercial. The providers also charge a fee for the service, which varies by business and the size of the check. Present the check along with the payee. Sign it in front of the representative and show your identification in order to get the funds.