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 says.
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 and printers.
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
- CFPB orders halt to 'security interest' debt collection practice – Navy Federal ordered to stop freezing customer accounts after fine issued ...
- Robo-comments on payday loans clog regulation-making machinery – A record 1 million comments on a federal payday loan rule will prolong its review, but thousands of pro-payday comments are suspiciously alike ...
- Navy Federal fined $28.5 million for debt collection tactics – Biggest US credit union strong-armed its members, CFPB says ...