What Is a Blank Endorsement?

A blank endorsement is a signature by someone who creates a financial instrument, such as a check. This enables any holder of the instrument to assert a claim for payment. Since no payee is specified, such an endorsement essentially turns the instrument into a bearer security.

Blank Endorsement Explained

The most well-known example of a blank endorsement is a check made payable to "cash" and endorsed on the back with the signature of the account holder. Blank endorsements are much more risky than pay-to endorsements. If the instrument is lost, it can be negotiated (cashed in or deposited) by anyone who finds it.

Blank Endorsement and Other Forms of Check Endorsement

In addition to blank endorsement, two other major types of check endorsement exist. These include restrictive endorsements, in which the party writing the check notes “For deposit only” on the first line of the back of the check and then signs their name underneath. This form of a check may only be deposited into an account with the specified name.

In addition, some banks prefer a check with a restrictive endorsement to have the recipient’s account number also spelled out clearly on the check, while others see this as a security risk.

The final type of check endorsement is a special endorsement, which a payer may craft in order to give the check to a particular person. The recipient of a special endorsement is the only person, who may cash or deposit this check. Instructions for a special endorsement are as follows: write “Pay to the order of [name of recipient],” and sign below.

Blank Endorsements and Depositing Checks

While most deposits into a bank savings or checking account qualify as a transaction deposit (meaning that the funds are immediately available and liquid, without any delays), it often takes certain checks a full 24 hours to fully clear although a portion of it could be available for immediate use. One exception to this rule is a certificate of deposit (CD), a savings account that restricts withdrawals for a time period lasting from 30 days to five years. In general, a depositor of a CD must give notice prior to withdrawing funds before the time limit expires. Fees are often associated for doing so

Interest on Blank Endorsements and Commercial Bank Profit

Customer deposits, including checks in a variety of endorsement methods (along with checking accounts, savings accounts, money market accounts and CDs) provide banks with the capital to make loans. Commercial banks make money by providing loans and earning interest income from those loans.