Personal Finance

6 min read

September 16, 2021

What Does 'Pay to the Order Of' Mean on a Check?

Everything you need to know about the term ‘pay to the order of’ on a check, how it works, and the pros of using pay-to-order checks.

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While checks may be rarely used these days, if you're new to working with them, all the related  jargon might be tough to understand. However, the smallest of details can hold the most importance. 

So, here's our in-depth guide to one small but important part of the check: the ‘pay to the order of’ section.

A check is a negotiable instrument, used mostly if you’re making payments to a person or an entity. The person who is making the payment is called a payer or drawer, and the person or entity to which the payment is to be made is called the payee or the drawee.

What Does 'Pay To The Order Of' Mean On A Check?

In most cases, while writing a check, you need to mention the name of the payee in the line following the words ‘pay to the order of’ on your check. Pay-to-order checks require endorsements from both parties, i.e, the payer and payee. The payer should sign the check to authorize the transaction to the payee, and the payee must sign it in the bank in order to cash it. 

The name of the payee, though, is an optional field because sometimes you can write the word ‘cash’ instead of the payee’s name, or leave the field blank temporarily. The former is called a bearer check and the latter is known as a blank check. Bearer checks or blank checks are essentially the same as cash because no one is designated as the payee in the line marked ‘Pay to the order of’. 

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How to Fill in the 'Pay To The Order Of' Section

It’s really simple:

  1. Fill in the name of the payee after the ‘pay to’ or ‘pay to the order of’ line on the check; 
  2. Ask the payee to sign the back of the check to endorse and initiate the transaction;
  3. The bank will then make sure that the person, group, or organization mentioned on the check is the one that receives the payment. 

If the bank fails to verify the bearer as the payee, the transaction is withheld. Otherwise, the sum is successfully transferred in 2-5 business days.

Unlike bearer or blank checks which can be cashed by anyone holding the check, the pay-to-order system ensures the money is transferred to the intended recipient only. 

Benefits Of Pay-To-Order Checks

Pay-to-order checks are a secure way to make payments, significantly mitigating check fraud. It ensures that only the payee specified on the check is authorized to receive payment. This helps protect the payer from an unauthorized person or organization fraudulently withdrawing money from the payer's bank account. 

However, while there may be instances in which you leave the ‘pay to the order of’ portion on a check temporarily blank — to fill it accurately later — it is highly unsafe to do so. This is especially true of a signed check, because the recipient of the money isn’t guaranteed as the payee if the check is lost or stolen. 

The ‘pay to the order of’ part of a check permits only the marked payee to receive the money.  In the case of blank or bearer checks, any person holding the check can be the bearer and can wrongfully cash the check for the amount stated. 

Cons of Pay-To-Order Checks

As pay-to-order checks are the safest form of checks, their cons are limited to the ones associated with any other type of check. For example, transaction times can get long. So, especially in the case of large amounts, perhaps cash, debit cards, or any other electronic means of money transfer would be a more preferable option, as they are faster and economical. These transactions are immediate and do not carry the extra charges that you’d pay to purchase new checkbooks every time you run out of slips.

Bottom Line

Although there may be safer means of transferring money today, such as through online and electronic payment gateways, if checks are what you’re going for, it is important to make sure you keep that piece of paper extra safe. Pay-to-order checks protect you and the bank from fraudulent transactions and are therefore the safest way to make payments through checks.

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Akash Kalra
Akash Kalra
Akash Kalra is a writer, podcaster, and first-generation entrepreneur, as the founder of Izart Content Services: Home of Data Driven Storytellers.

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