4 ways your signature can spell financial trouble
Legend has it that to make sure it wouldn't be missed, John
Hancock signed the Declaration of Independence with flamboyance and flair.
Today, financial scenarios requiring your signature don't require quite as much
bravado as Hancock, but how and what you elect to sign can have serious
repercussions on your financial life.
Here's a look at how a little thing like your signature can
cause a big headache if you're not careful.
Spouses signing each
Your hubby is out of town. You've received an expense check
with his name on it in the mail, and you're jonesing to deposit it into your
joint checking account. You consider signing his name on the back of the check;
after all, you are married. And who would really know?
Why it matters: Even though you're married or share a joint
checking account, you could land in legal hot water if you scribble your
spouse's name on the back of the check.
"A spouse may not endorse the name of the other spouse
without consent," says Charles R. Gallagher III, an attorney at Gallagher &
Associates in St. Petersburg, Fla. Do so, and Gallagher says you're committing
fraud. That means the check could be denied for payment by the bank it's
written on and you could have the cops knocking on your door if your spouse
gets ticked and turns you in.
Some consumers try to sidestep problems by simply signing "for
deposit only" on the back of the check. But Gallagher says that's not always
foolproof. A persnickety spouse could
still press the legal issue. Your best bet is either getting your mate's written
OK to sign his name on checks when he's unable to. Or, Gallagher says, a formal
power of attorney is also an option and ensures the bank won't give you a hassle.
Signing checks made
out to your kids
It would seem fine to endorse the back of those birthday
checks grandma sends your 5-year-old (or younger) child. And what about
checks made out to college co-eds who are away from home but need some dough deposited
into their bank account?
Why it matters: Mitchell D. Weiss, professor of finance at the University of Hartford Barney School of
Business in Connecticut says signing your kid's name on the back of a check is usually OK if
the child is a minor, and you're depositing the check into the child's personal
account. However, if you plan on depositing the check into an account that's
not in the child's name or that the child is a joint account holder, then you're
crossing the line from legal to fraud.
If your child is older than 18, forget about it. "Unless you have a power
of attorney to endorse checks made out to your adult child, you and the bank
into which you deposited the money is at risk for the check not being paid,
should the child or whomever wrote the check to the child take issue with your
action," says Weiss.
Credit card purchases
You don't feel like going to pick up the pizza, so you hand over your credit
card to your boyfriend or sister who offered to fly if you'll buy. Or you
forgot your credit card, so your kindhearted
hubby hands you one of his cards -- from an account in his name only -- for you to swipe at checkout.
Why it matters: Only
owners and co-owners of credit card accounts should use their cards. Natalie
Brown of Wells Fargo Consumer Lending says, generally speaking, credit cards
should only be used by the individual whose name is on the front of
the card. "If a cardholder would like to give a spouse or significant other,
care giver, child, etc., authority to use the card, they should do so by
either making them an authorized user or by making them a joint owner," she
If you sign someone else's name for a credit card purchase,
the card issuer could deny the charge because technically it's fraud. And a
cardholder could attempt to dispute the charge as being fraud since the
cardholder didn't sign for the purchase.
Most card issuers have simple procedures for adding users to
an account. However, Brown says, once a cardholder makes another
individual an authorized user, the original cardholder is liable for all
charges made by the authorized user. "Making someone a joint owner of the
credit account requires the same note of caution because when two people own
the account, each cardholder is jointly and individually responsible for all
charges made on the account."
Potential fraud not only concerns where you sign, but in
what color ink you sign with. Long gone are the days when blue, red and black
were the only options for your ballpoint pens. Sparkly and gel ink and colors
of every hue found on the rainbow are at your disposal. While those funky
inks are fun on birthday cards, grocery lists and desk pad doodles, they might
not be suitable for financial documents.
Why it matters: If
you sign a credit card application in black ink, its authentication could be
challenged, says Jim Angleton, president of Aegis, a corporate prepaid debit and charge card issuer. "If you're applying in person, you might be asked to
sign in another color ink. We advise signers of our documents to use blue ink
to provide contrast to our applications and for the future if there are ID
issues." That's because black is the most popular printer color and Angleton
says that makes black the easiest color to be copy and pasted via home software
Endorsing the back of a check in red ink could cause the
check to be null and void. Red is also problematic if you're filling out a
credit card application. "Since the Cold War era, red has long been considered
a warning color," says Angleton. In the past, bank proofers who verified signatures would routinely
circle the check signature using a red pen if they doubted the signature's
validity. "Some of the mentality that red is the color of warning still exists
today," says Angleton.
"Ironically, hot colors
like pink, lime green, etc., on checks are generally accepted by banks," says
Angleton. "The never-use colors are red, white, silver and gold. While the
color of choice is always black, and blue is the all time favorite."
See related: 3 financial fights couples have -- and their 3 fixes
Published: October 15, 2012
If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.
Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now!