Pay To Order

AAA

DEFINITION of 'Pay To Order'

A check or draft that must be paid via endorsement and delivery. Pay-to-order instruments are negotiable checks or drafts that are generally written as "pay to X or order." These instruments stand in contrast to pay-to-bearer instruments, which do not require endorsement.

BREAKING DOWN 'Pay To Order'

The Uniform Commercial Code outlines the rules pertaining to pay-to-order instruments. It specifies that ownership of this type of check can be transferred only via endorsement – someone who accepts a check must endorse it before transferring it somewhere else.

RELATED TERMS
  1. Make To Stock - MTS

    A traditional production strategy used by businesses to match ...
  2. Pay To Bearer

    Any check or draft that can be transferred to the holder by delivery ...
  3. Endorsement

    1. A legal term that refers to the signing of a document which ...
  4. Acceptance

    A contractual agreement on a time draft or sight draft to pay ...
  5. Bank Draft

    A type of check where the payment is guaranteed to be available ...
  6. Bounced Check

    A slang word for a check that cannot be processed because the ...
Related Articles
  1. Options & Futures

    Demystification Of Bank Accounts

    Find out which type of account suits your specific needs.
  2. Budgeting

    When Good People Write Bad Checks

    Overdraft protection can help when you overestimate your balance, but it will cost you.
  3. Credit & Loans

    Refinance Vs. Debt Restructuring: What's Best For Your Credit Score?

    Discover key differences between refinancing and restructuring debt in regard to terms, the negotiation process and effect on credit scores.
  4. Investing Basics

    Explaining Rehypothecation

    Rehypothecation occurs when an asset used as collateral for one party is reused in another transaction.
  5. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  6. Economics

    What Does a Merchant Bank Do?

    A merchant bank is a financial institution that performs underwriting, loan services, financial advising and fund raising services to large corporations.
  7. Economics

    The 3 Biggest Canadian Banks

    Examine some of the largest banks in Canada, which also rank among the largest and most important banks in the industry worldwide.
  8. Economics

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  9. Economics

    What's an Irrevocable Letter of Credit?

    An irrevocable letter of credit (ILOC) is a financing vehicle used to facilitate commerce between two parties who are not familiar with one another.
  10. Entrepreneurship

    The 4 Best Websites For Small Business Loans

    Discover some of the best websites that small business owners utilize to obtain necessary financing at competitive interest rates.
RELATED FAQS
  1. Are all bank accounts insured by the FDIC?

    The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that protects you against ... Read Full Answer >>
  2. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  3. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  4. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  5. What role does a correspondent bank play in an international transaction?

    A correspondent bank is most typically used in international buy, sell or money transfer transactions to facilitate foreign ... Read Full Answer >>
  6. What is the difference between a correspondent bank and intermediary bank?

    Correspondent and intermediary banks serve as third-party banks that coordinate with beneficiary banks to facilitate international ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!