The signature on the back of a bank cheque is called an endorsement. It means that you are giving permission to the bank to process the cheque and transfer the money to the payee's account. The signature also helps the bank to verify your identity and prevent fraud.
We put our signature on the back of a bank cheque for two main reasons
1. Verification, Your signature on the back of the cheque, also known as an endorsement, acts as a form of identification. When you deposit or cash the cheque, the bank compares your signature on the back with the one on file in your account. This helps to ensure that the rightful recipient is claiming the funds.
2. Authorization, By signing the cheque, you are essentially instructing the bank to transfer the funds from the drawer's account to your account. Your signature serves as your authorization for the bank to complete the transaction.
In addition to these two main reasons, there are a few other benefits to signing the back of a cheque:
Prevents fraud, If your cheque is lost or stolen, the signature on the back can help to prevent someone else from cashing it.
Creates a paper trail, Your signature on the back of the cheque creates a record of the transaction, which can be helpful if there are any disputes later on.
Allows for different types of endorsements, Depending on how you sign the cheque, you can control who can cash it and how the funds are deposited.
It is important to note that the specific requirements for endorsing a cheque can vary depending on the bank and the country. For example, in some cases, you may need to include additional information on the back of the cheque, such as your driver's license number. It is always best to check with your bank if you are unsure about how to endorse a cheque.
The signature on the back of a bank cheque is known as an endorsement. It is used to authorize the transfer of the funds from the cheque to another party. When you sign the back of a cheque, you are giving permission for the funds to be transferred to either yourself or someone else. This helps to ensure that only the intended recipient can cash or deposit the cheque.