Cashier’s Check Vs Certified Check: Everything You Need to Know

Introduction

If you run a business, checks are likely a familiar aspect of your payment mix. Among the various types of checks, cashier’s checks and certified checks are frequently encountered. But what exactly do these types entail, and which option is best suited for your needs?

If you find yourself pondering these questions, you’re not alone. In this article, we’ll delve into the definitions of cashier’s checks and certified checks, explore their differences, and discuss why understanding these distinctions is essential for effective financial management.

What is a Cashier's Check ?

A cashier’s check is a payment instrument, issued by a bank and backed by its funds, making it a secure form of payment. Unlike personal checks, which may bounce, a cashier’s check is guaranteed by the bank to pay the specified amount.

In essence, the bank acts as both the drawee and drawer, assuming full responsibility for the payment.

Cashier’s checks are often preferred for large transactions, such as real estate purchases or brokerage transactions, due to their guaranteed nature. When a customer issues a cashier’s check, the bank immediately debits the amount from the customer’s account or accepts it in cash. This ensures that the funds are available to cover the cashier’s check.

What Is a Certified Check?

A certified check is a personal check endorsed and guaranteed by the issuing bank which verifies the account holder’s signature and sets aside the specified amount. These checks are typically utilized for substantial transactions or purchases where a high level of security is required.

To obtain a certified check, one must visit their bank in person, provide the recipient’s details and check amount, pay a fee for the certification process, and have the full amount of the check available in their account.

Certified checks are considered secure due to the involvement of the bank in guaranteeing the funds.

Difference Between Cashier's Check vs. Certified Check

A cashier’s check is issued from the bank’s account, while a certified check is issued from the check writer’s account. With a cashier’s check, funds are directly guaranteed from the bank, making it ideal for significant transactions like real estate purchases. Conversely, a certified check operates akin to having your personal check authenticated by the bank, providing reassurance for transactions such as buying a vehicle or paying legal fees.

Comparing cashier’s checks to certified checks is like discerning between two layers of security, each serving its purpose in ensuring financial security and peace of mind. Now, let’s delve into an overview of the variances between cashier’s checks and certified checks:

• Issuing entity:

  • Cashier’s Check: Issued and signed by the financial institution, drawing funds from the bank’s account.
  • Certified Check: Written by the account holder, with the bank certifying the availability of funds in the customer’s account.

• Account usage:

  • Cashier’s Check: Bank’s account is used for the check.
  • Certified Check: Customer’s account is used for the check.

• Signing authority:

  • Cashier’s Check: Signed by the financial institution.
  • Certified Check: Signed by the customer.

• Cost:

  • Cashier’s Check: Typically costs $15 to $20.
  • Certified Check: Generally costs $10 to $15.

• Security features:

  • Cashier’s Check: Includes watermarks, bank signatures, and other security elements.
  • Certified Check: Involves signature verification and fund certification by the bank.

• Availability:

  • Cashier’s Check: Available at banks or through online banking services.
  • Certified Check: Usually obtained in-person at a bank branch.

Lost Your Cashier's or Certified Check? Here's What to Do

When you lose a cashier’s check or certified check, it’s crucial to act swiftly and follow the specific guidelines provided by the issuing bank to address the loss effectively.

However, the process for replacing a certified check is generally more straightforward compared to replacing a cashier’s check, which may involve additional steps such as obtaining an indemnity bond to protect the bank from potential losses.

Here’s what you need to do:

For cashier’s check:

1. Report the Loss: Contact the bank that issued the cashier’s check immediately to report the loss and request assistance.
2. Declaration of Loss: Fill out a declaration of loss statement, affirming that the check is lost and will not be found.
3. Replacement Process: The bank may require you to purchase an indemnity bond to get a replacement check. This bond acts as insurance to cover potential losses if the original check is found and cashed.
4. Reissuance Timeframe: It can take up to 90 days for the bank to issue a replacement check after all necessary steps have been completed.
5. Cost Consideration: Be aware of fees associated with obtaining a replacement check, including costs for indemnity bonds and potential processing fees.

For certified check:

1. Report the Loss: Contact the bank that issued the certified check immediately to report the loss and request assistance.
2. Declaration of Loss: Fill out a declaration of loss statement, affirming that the check is lost and will not be found.
3. Replacement Process: The bank may have a simpler process for replacing certified checks compared to cashier’s checks.
4. Reissuance Timeframe: The timeframe for reissuing a certified check may be shorter compared to a cashier’s check.
5. Cost Consideration: Check with the bank for any fees associated with obtaining a replacement certified check.

How to Avoid Cashier’s and Certified Check Fraud?

To avoid cashier’s and certified check fraud, follow these essential tips:

1. Know your sender

   Be cautious about accepting checks, even cashier’s or certified checks, from unfamiliar individuals or businesses. It’s crucial to verify the legitimacy of the sender before accepting any form of payment.

2. Verify authenticity

   Always call or visit the bank that issued the check to confirm its genuineness. Avoid using the phone number listed on the check itself, as it could be fraudulent. Instead, look up the bank’s contact information independently to ensure you are verifying with the correct institution.

3. Ensure check clearance

   Contact your financial institution to verify that the check has cleared and the funds are available in your account before proceeding with any transactions or releasing goods or services.

4. Save documentation

   Keep all documents associated with the cashier’s or certified check, as they may be valuable in case of any discrepancies or issues that arise later on.

Which Is Best for Your Business: Cashier's Check or Certified Check?

Determining whether a cashier’s check or a certified check is best for your business depends on several factors such as the specific transaction, the level of security required, and your preferences.

Cashier’s checks offer guaranteed funds directly from the bank’s account, making them ideal for high-value transactions where certainty is crucial. On the other hand, certified checks involve verifying the availability of funds in the customer’s account, providing assurance of payment without direct involvement from the bank.

Consider the nature of your transaction, the convenience of obtaining each type of check, and any associated costs or requirements. Ultimately, choose the option that aligns best with your business needs and offers the necessary level of security and assurance.

FAQs

1). What is the downside of a cashier’s check?

The downside of a cashier’s check is the complexity of replacing it if lost or stolen, potentially requiring an indemnity bond and documentation submission for bank investigation. This process may incur fees and a waiting period, making it burdensome for the purchaser.

2). How long does it take for a cashier check and certified check to clear?

Cashier’s checks and certified checks typically clear within one to two business days, but it can vary depending on the bank’s policies and the amount of the check. The clearing process may take longer if the check is for a large sum or if there are any issues with verification.

3). How to get a certified check?

To obtain a certified check, visit your bank branch, furnish recipient details and the check amount, and pay the fee. The bank verifies your account balance for funds sufficiency, then certifies the check with a stamp or seal, ensuring it’s backed by guaranteed funds.