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Restrictive Endorsement: Definition & Example

Instructor: Rana Abourizk

Rana has a Masters Degree in Business Administration and is pursuing a Doctorial Degree. She has been teaching online for over a year. She has a strong business background.

Have you ever seen an endorsement of: ''For Deposit Only'' on the back of the check? If yes, did you wonder why and what that meant? Today, we will go over what restrictive endorsement is and review some examples.

Sam has just received some good news. He will be starting his new job in a successful recruiting company as an Account Manager. One of his job requirements is to manage deposits for each of the 5 offices in the area. Each office has a different account number for deposits. All five of the company's offices use the same bank to do business. In order to make things easier for Sam and the bank, he stamps the back of each check deposit with ''For Deposit Only'' with the appropriate account number. The endorsement that Sam has used is known as Restrictive Endorsement.

What is Restrictive Endorsement?

Sam may ask, ''What's the difference between a blank endorsement and a restrictive endorsement?'' He wants to know exactly how different they are from each other so that he can identify and use the appropriate of the two when needed. He thinks that he knows the answer but he just needs to make sure that he's right.

A blank endorsement is a simple signature of the endorser. There aren't any restrictions. The check can be cashed or deposited. A restrictive endorsement is placing a restriction or constraint on the check. When the check is transferred from one person to another, there is a restriction. While the business can stamp the check with ''Pay to the Order of the Bank'', ''For Deposit Only'', and the business name and account number, what makes the check restrictive are the words ''For Deposit Only''. The ''For Deposit Only'' stamp is ordered by businesses because they use restrictive endorsements on checks so frequently.

Examples

Example 1

Sally is a small business owner, who also manages her store. It's only her and another employee who work there during the day. Sometimes, the other employee makes the deposits for the store. Sally makes sure to stamp all the checks with the restrictive endorsement with: the bank name, ''For Deposit Only'', and the business name and its account number. The words that make it restrictive are ''For Deposit Only'', while the rest are additional.

Example 2

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