Pay To Order

Anyone out there still write checks (on paper)? Yes? No? Maybe a couple every year? Okay, well, go find that checkbook, blow off the dust, and take a look at one of those checks. See the part that says “Pay to the order of”? That’s where we write the name of the person we’re writing the check to, and it basically means that that financial instrument—that check—can only be cashed, deposited, or transferred by that person. In other words, it’s a “pay to order” instrument, which means it’s owned by a single entity.

Banks and drafts are the most common types of pay to order instruments, and once they’re endorsed and delivered, whether that delivery involves cashing, depositing, or transferring the check, the bank has to give them the money.