Overview
Banks use signature cards to identify the rightful signers of an account. These cards you can use not only for the individual but also for business accounts. The bank uses the signature card to verify the account holder’s signature for all types of communication to and from the bank.
A signature card offers legal protection to account holders. It also serves as an important source for the bank to verify the authenticity of issued checks or other banking instruments.
Let us review some key issues regarding a bank signature card and see how it works.
What is Signature Card for a Bank Account?
A signature card is a document that is used by the bank to acquire the specimen signature of the bank account holder.
A signature card is signed by the account holder at the time of bank account opening. Depending on the bank account type, one or more signers can sign the card. The bank then keeps the specimen signatures for its record.
Most banks still use paper signature cards. However, some banks may require digital signatures from their customers if the process is fully online. The banks may use other verification methods such as a direct phone call to verify the genuineness of the specimen signatures submitted electronically.
What is Included in a Signature Card?
A signature card includes the information of the signers and their specimen signatures. If there is more than one signer, the card must include the details of all signers.
Most banks will require the following information on a signature card:
- Names of the signers, DOBs, and Addresses.
- Social Security numbers of the account holders.
- Authorized persons to sign the corresponding bank instruments such as checks.
- Specimen signatures of all signers.
- Conditions to pass the checks such as one or all signers must sign the check to pass the payment.
In some cases, the bank may record the relevant information separately. The signature card can be used to obtain the specimen signatures only. However, it is important to nominate the signers and conditions at this stage.
What is the Use of a Signature Card? – For customers and the Bank
The signature card is an important document for customers and the bank. It acts as the link between both parties in legal correspondence.
The signature card is a useful verification tool for bank staff. When customers issue checks and other payment instruments, the bank uses the signatures cards to verify the signatures on the checks.
The bank also uses the signature card to verify if the required number of people have signed the instrument or not. For instance, a joint bank account may require both customers to sign the check for clearance.
For customers, the signature card acts as a legal cover. Otherwise, anyone with basic bank information could withdraw the money. Hence, there would be no protection for customers without a signature card.
Customers can also specify conditions for signature combinations for payment instruments and legal correspondence with the bank. For example, a company can nominate a key employee to gather basic bank account information such as a bank statement from the bank with authorized signatures on the card.
Signature Card for Business Bank Accounts
Signature cards for business accounts may have more than one authorized signer. In some cases, companies can use a combination of different signers to proceed with checks and other payment instruments.
Any changes in the company’s legal ownership may require changes in the bank records as well. The bank may require a company to provide new specimen signatures of authorized persons in such cases.
In the case of a sole proprietorship, the owner of the company would sign the specimen signature card.
Signature Card for Individual and Joint Bank Accounts
The signature card for an individual would work in a simple manner. The bank would retain the details and specimen signatures of the individual to verify the authorization of checks.
In the case of a joint account, the signers may choose different conditions. For instance, they can choose either or survivor condition that allows only one of them to sign the check. They can also specify both or more than two signers to sign the check.
Any changes to the bank signature card will also require the same number of signers to sign the application before the bank.
Making Changes in the Signature Card
Only authorized persons can make changes to the bank signature card. The bank verifies the applicant against the record at the time of bank account opening.
In the case of an individual, the applicant may apply for a change in the specimen of the signatures. The applicant can also authorize another person to sign the bank instruments such as a check on his/her behalf.
Joint accounts for individuals and company accounts with more than one signer will always require the same number of signers to apply for any changes. Company accounts often change authorized persons to sign checks. Hence, they need to apply with the bank to update any alterations or changes in the signature card.
Do Banks Still Use Paper Signature Cards?
There is no legal requirement for any bank to use paper signature cards. However, most banks still prefer to use paper signature cards. They collect the specimen signatures on a paper card or form at the time of bank account opening.
Some banks have introduced online bank account opening procedures. These accounts require digital signatures from applicants. The banks may use digital signature cards for these accounts as well. However, banks may use additional verification methods such as a direct phone call to verify the genuineness of the signatures.
FDIC Requirement for a Signature Card
Financial regulatory authorities and insurance coverage providers for bank account holders may require certain criteria for bank accounts. The FDIC is the main insurance provider to depositors in the US.
The FDIC does not specify what a signature card is or the exact requirements. It does not specify any particular format of the signature card as well. However, the FDIC would require certain bank account information and procedural compliance.
A signature card can be seen as an important protection tool for account holders. It can protect the customers in case of any errors or misconduct from the bank.
Challenges with Bank Signature Cards
Account-holders can specify different conditions such as an upper limit for a certain signer for a bank account. In some cases, more than two account holders would sign the checks. Thus, a bank would require to maintain more than one signature card in these cases.
Paper signature cards are kept at the bank branch where the account is opened. Any alterations to it would also be made only at the same branch. Thus, it can cause inconvenience for frequently moving customers.
Customers regularly face signature mismatch problems as well. Hence, they need to regularly visit the bank branch and provide an updated specimen signature to the bank. However, it can cause trouble for the bank if customers frequently change their signatures making bank staff complacent about the security check.
Final Thoughts
A Signature card is an important document that is used to verify the authorization of the bank account holders. It contains basic information about the customers and specimen signatures. Individuals and companies can nominate more than one signer to the bank for checks and other instruments.
