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What are Signature Cards Used For?
Why don't banks use the signature card when processing checks for payment?
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 You've uncovered one of the banking industry's worst-kept secrets! Actually, it is no secret at all. Most banks simply do not have the capacity to verify the signature on every check drawn on them that is presented for payment.
Years ago banks actually reviewed check signatures. The first bank we worked for (back when our computers were abacuses!) didn't have account numbers, and many customers had generic checkbooks supplied by the bank without personalization of any kind. The bank had to recognize those checks by signature. They had $17 million in deposits, and had a back-office staff the same size as the bank we last worked for, which had $4 billion on deposit.
Today, most check processing is automated. Very few checks are actually given an actual physical eyeball test. Banks remain responsible for those signatures even if they don't look at them, but most banks have made the business decision to self-insure against missing a forged or missing signature. In other words they have weighed the costs of acquiring the added personnel and systems needed to physically review all checks against the costs of increased liability for unauthorized checks and determined that they can best manage their risk by sampling checks for signature rather than examine every one. The signature cards are used in that sampling.
At the same time, however, technology is advancing toward the time when automated scans of signatures on checks can be rapidly verified against digitized copies of signatures from signature cards, greatly increasing the percentage of checks actually reviewed without adding to staffing requirements. That technology is not perfect and is not used in all banks.
It is very important that you review your bank statement for unauthorized transactions promptly upon receiving it from your bank. If the bank misses an unauthorized item and you don't catch it and report it promptly, you could become liable for the item.
Published on BankingQuestions.com 8/25/08
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