What is a third party check?

What is a third party check?

A third party check is a two-party check that has been signed over to a third party. A check is written from one person to a payee, but the check can be endorsed to someone else, the third party. Once endorsed, the original payee has given the rights to the funds to the third party.

Basically, I can write you a check for $100. However, you owe your friend $100. You can simply endorse the check to your friend who can now cash the check. 

There are a lot of uses for third party checks. You may have even cashed a third party check without even realizing it.

Luckily for you, I’m going to show you what exactly is a third party check. I’ll even show you how to endorse a check and how to cash it. Cashing a third party check may seem daunting now, but it’s really quite easy.

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What is a third party check?

A third party check is a two-party check which endorses the funds from one payee to the next. The original payee of the check is giving up their rights to the money to someone else. The third party may cash the check or deposit the funds.

For example, your grandmother wrote you a birthday check for $50. However, you can’t spend the check until it’s cashed.

Maybe you are shopping with a friend who happens to have $50 cash on them. You can sign over the rights to the check to your friend who gives you $50 cash.

When your grandmother wrote you the birthday check, it is considered a two-party check. The financial transactions are between two people, AKA a two-party check.

Signing over the rights to your friend makes it a third party check.

The transaction is now between three different people, making it a third party check. The original intent was to pay you the money, but now that check is going to pay someone else.

So what are some common reasons that you might use a third party check?

  1. You owe someone else money and signing over the check fulfills that debt.
  2. Endorsing the check allows someone else to cash it for you.
  3. You want to give money away but don’t have any cash on you, only a check made out to you.

It doesn’t really matter the reason, you have the right to give money owed to you to someone else. Using a third party check is only one way of doing so. However, it is usually easier to just pay someone cash then endorse a third party check.

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How do you endorse a check to a third party?

To endorse a third party check, sign the back of the check and write “pay to the order of” and the new payee’s name. Instructions for endorsing a check can be found on the back of the check. You may want to check with your bank for specific instructions.

How do you cash a third party check?

To cash a third party check, visit a bank with the endorsed check and photo ID. The check will be deposited or cashed like a two-party check. However, banks may require more information if fraud is detected. Some ATMs and check cashing stores may accept third party checks.

Verify the third party check is endorsed

The first step is to verify the check has been endorsed and you are listed as the new payee. Ensure the original payee has signed the back of the check and endorsed the check in your name. You will not be able to cash a check if you are not listed as the payee.

Have photo identification ready

Your bank may require you to present photo identification to deposit the check. Banks are constantly monitoring for fraud and third party checks are easy targets. A bank may require you to present your photo ID or the second parties ID if fraud is suspected.

Visit a bank in-person

The best place to cash a third party check is in person at a bank. Typically, you won’t have any issues if you’re cashing a third party check at your bank or credit union. Cashing a check at a bank you are not a member of may involve a fee or need to verify your identity.

Certain ATMs accept third party checks

In some cases, you can deposit a third party check using your bank’s ATM. However, some banks will only accept a third party check in person. A bank that does not accept third party checks at ATMs may mail the check back to your address on file.

Certain check cashing stores accept third party checks

Most check cashing stores do not accept third party checks. Check cashing stores usually deal with two-party checks, payroll, tax returns, and other common checks. However, there are a select few check cashing stores which will cash a third party check for a fee.

Before visiting a branch in person, call or verify online that third party checks are accepted. Typically, cashing a check at a check cashing store is not advised because of steep fees. Most check cashing stores will charge a percentage of the check rather than a set amount.

Walmart will not cash third party checks

Walmart does not cash third party checks. You can cash two-party checks up to $200, payroll, tax, cashier, and many other types of checks at Walmart. Third party checks should be cashed at your local bank or credit union.

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Summary: What is a third party check?

As you can see, a third party check is a two-party check which has been signed over to a third party. The second party has given the rights to the funds to a third party. The third party has the right to deposit or cash the funds.

You might use third party checks to pay someone without having cash on hand. Most people endorse a check to someone else to cash for them.

To endorse a check, sign the back of the check. You will also need to write “pay to the order of” and the new payee’s name. 

To cash a third party check, visit a bank with your photo ID. The bank will cash the check like a normal two-party check. However, the bank is monitoring for fraud and may require more information if fraud is suspected.

In some cases, you can cash a third party check at an ATM or check cashing stores. These options are not ideal. Banks may not cash a third party check deposited through an ATM and not all check cashing stores take them.

Unfortunately, you cannot cash a third party check at Walmart.