Budgeting

Certified Check vs. Cashier’s Check: What’s the Difference?

When you need to move money around, sometimes a check is an ideal option—especially if you need to mail a payment on an installment loan or send money to an individual. In addition to the traditional personal check, two types of checks are relatively easy and affordable to use.  And in this blog, we’ll walk you through the difference between certified checks vs. cashier’s checks.

Certified checks and cashier’s checks are both considered “official checks.” Either of these checks can take the place of cash, credit, or personal checks. 

If you’re looking for an alternative payment option, read on to discover which one is best for you: cashier’s check vs. certified check. 

What Is A Cashier’s Check?

A cashier’s check is a type of bank check issued by a bank. A cashier’s check is similar to a money order. This type of check bears the name of the payee and the amount, and the recipient is allowed to use the check to collect funds from the payer’s bank.

Cashier’s checks are typically used for large purchases. For example, cashier’s checks complete or close many real estate transactions. 

A cashier’s check has some advantages over personal checks regarding security and reliability. A personal check is only good if there is enough cash in the account to which it is attached. But, a cashier’s check is created with the balance in the account, which means the bank will not issue a cashier’s check if the account is not currently enough to cover the check.

When the bank creates the check, the money essentially becomes the bank’s money. The Federal Deposit Insurance Corporation (FDIC) now guarantees the money will stay in the bank. That protection ensures that the funds will be available to the payee as soon as they deposit the cashier’s check. 

How Do Cashier’s Checks Work? 

Getting a cashier’s check is very similar to the process of getting a money order. To buy it, you take the amount and name of the payee to your bank teller, and they give it back as an official form of payment.

A bank will typically require a customer requesting a cashier’s check to present valid photo identification and an account number before issuing the check.

The customer then requests the check amount, determines if they want it made out to themselves or someone else, and provides additional information required for depositing with the bank or credit union.

Once the payment is processed, the check will be printed and mailed to the payee or delivered to you. No matter the delivery option, you should always get a receipt.

Cashier’s Check Advantages 

A cashier’s check is a secure way to transfer money. Money that you pay into a cashier’s check becomes the property of the bank, which means that they then have an incentive to protect it for their safety. The bank’s security features, tracking, and insurance apply to any money converted into a cashier’s check. And since the bank guarantees that deposit, your payee will most likely get the funds released quickly should they deposit the check.

Cashier’s Check Disadvantages 

Cashier’s checks are expensive to purchase. On average, cashier’s checks cost nearly ten times more to process than a money order. Additionally, cashier’s checks are less convenient because you can only buy them with cash or a debit card during banking hours.

What is a Certified Check? 

A certified check is a check that a bank also issues. Like a cashier’s check, a certified check converts cash into a check that anyone can use for payments. Instead of getting a payment from the customer, the bank creates a certified check by using funds from your bank account. 

How does a Certified Check Work?

When you request a certified check from your bank, they first check that the account holder’s signature matches their records and that you have enough funds to cover it. Once this information is verified, the amount is withheld until the check is either cashed or deposited. 

Let’s say you have a personal checking account with $1,000 in it. You need a certified check to pay your landlord $500 for rent. When you go to the bank to purchase the certified check, the teller will ensure enough to cover the check amount. After that certified check is drawn, you will no longer be able to access the funds, even though they may still be sitting in your account. 

Advantages of Certified Checks 

Certified checks carry two significant advantages for the payee—security and speed.  The bank guarantees a certified check, so there is no question that sufficient funds are available. And since the bank is holding those funds, they are available as soon as the payee deposits the check—or, at the very latest, the next business day. With a traditional personal check, the account holder is responsible for keeping the money available, and the bank must verify funds before a payee’s check can clear.  

Disadvantages of Certified Checks 

If you use a certified check, you cannot release the funds. Once the money is certified by the bank, it remains frozen until someone deposits the check. In that sense, certified checks are essentially non-refundable. If the certified check is lost or stolen, you can get a replacement check issued in most cases. However, the bank will have you sign an agreement that holds you accountable for funds they lose should someone find the lost check and cash it.  

Check Scams and Fraud 

Even with all of their pros and cons considered, cashier’s checks and certified checks are more secure than personal checks. But, there are still many ways that thieves can use check scams and fraudulent check practices to steal your money. 

Fraudulent check scams happen in many instances. One of the most common is presenting a fake certified or cashier’s check as payment for something.

A common scam happens on buyer/seller websites like Craigslist. A buyer will send a seller a forged cashier’s check written for much more than the item’s price. Once the seller deposits the check, the buyer asks for the extra money he “mistakenly sent” back. The seller returns the money. Later, the bank discovers that the check is fraudulent, and the seller is responsible for all the lost funds. 

Certified checks are also prone to counterfeit fraud. Since a bank, by law, has to cash a certified check by the next business day, they may not verify the check until after they have given the money to the payee. 

How to Protect Yourself From Scams 

As technology advances, so does the use of check frauds and scams. Here are some tips for safely using certified checks and cashier’s checks: 

  • Don’t ever accept a check for more than the correct amount. If you get an incorrect check, ask for a new one. Never wire or transfer money for any reason.
  • Carefully read any check you receive. Look for things like typos, grammatical errors, and bank logos that appear odd or offset on the check.
  • Contact the bank. Certified checks and cashier’s checks are easily identifiable by their financial institutions. Before you cash the check, Find the bank’s contact information and give them a call to verify. Give them the purchaser’s name, phone number(if available), and check number.   

Payment Alternatives 

There are other payment options available outside of checks that don’t involve using a bank account: 

Prepaid Debit Card

A prepaid debit card is a gift card for a debit account. The banks can issue a credit card to the cardholder, which may charge a transaction fee. The world’s leading payment processors accept prepaid debit cards, and major credit card companies typically brand them. Businesses that accept Visa, MasterCard, Discover, and American Express will typically accept prepaid debit cards. 

You can use a prepaid debit card virtually anywhere with the convenience of any credit card or bank account holder. The transactions made with a debit card are processed like any other credit card. But there are differences between a credit card and debit card.

When your prepaid card runs out of cash, you can get a new one. Cards can also be reloaded at a retail store. If your prepaid card gets lost, contact the card provider to stop payments. Depending on the provider, you may be able to get a new card issued.

Wire Transfer

Another payment alternative is a wire transfer. The funds transferred in a wire transfer are electronically sent instead of physically sent. Wire transfers are the only way to move cash without accidentally canceling or misplacing it. Additionally, wire transfers are an expensive way to send money. You’ll need to go into a bank in person, which doubles the time it takes compared to other methods. Considering that the average transfer fee is around $30-$40, this payment method is not worth it for most people. You may want to reserve wire transfers for moving money around to accounts in different banks or if you need to send money internationally.  

Conclusion 

Cashier’s checks and certified checks are just a few of the ways that you can move money around. They can be used to pay for anything from rent, to making a payment on your online personal installment loan. Which one you choose may depend on the level of security and availability you need. But whatever option you choose, make sure that you understand the risks and expenses involved. Protecting your payments will stop you from spending more money than you have to. 

References:
What is a Certified Check
How To Spot, Avoid, and Report Fake Check Scams