Cashier’s Check: What You Need to Know
Point of interest
Cashier’s checks provide an efficient and guaranteed way for businesses and individuals to pay and receive larger sums of money. It’s a safe way to sell or buy expensive items, and it protects both parties during the transaction.
When making a large purchase or transaction, you may be asked to provide payment via a cashier’s check. This form of payment is different than a personal check or a certified check. Unlike personal checks, which can bounce if there isn’t enough money in the account to cover the amount, a cashier’s checks provide guaranteed funds, faster access to the money and protection against the threat of check fraud.
According to the 2019 AFP Payments Fraud and Control Survey Report, which was published by J.P. Morgan, 70% of organizations have experienced check fraud, which cashier’s checks can help cut down on. Cashier’s checks provide the seller with peace of mind by knowing that there is a guarantee that the funds are available, and they can be used to complete a ton of different financial transactions. Plus, while it may seem like cashier’s checks only benefit the person on the receiving end, there are advantages for both sides.
What is a cashier’s check?
When you write a regular personal check, you are guaranteeing with your signature that the money is available in your checking account. The company receiving the personal check is forced to trust that you are who you say you are and that you’ve accurately reported the funds being available. The recipient, in turn, will need to wait several business days for the bank to verify the funds are in your account and for the check to clear before they can access the money.
A cashier’s check, on the other hand, is a check where the funds are guaranteed from the bank’s accounts — not yours. It’s basically like handing a person cash, but in check form. The money for the check is transferred from your account to the bank’s accounts immediately when you request the check, where it is held until the cashier’s check is cashed. When the recipient cashes the check, the funds are withdrawn from the bank’s accounts, as they’ve already been transferred there.
Merchants and other recipients trust cashier’s checks because the funds are guaranteed by the bank and not an individual. Because of this, most banks and financial institutions will give the recipient instant access to the funds from a cashier’s check rather than making them wait for it to clear.
Anyone can purchase a cashier’s check from a financial institution. However, some banks might only allow those with accounts through the bank to get a cashier’s check. Additionally, there may be a fee associated with getting a cashier’s check, but that depends on the financial institution’s policies.
When and why do I need a cashier’s check?
You’ll find many situations in life in which a business or an individual requires a cashier’s check. Typically, these are instances where large sums of money are changing hands, or when access to the funds is needed very quickly. You may also see businesses require cashier’s checks in industries that have higher rates of fraudulent transactions.
It’s common to see the requirement of a cashier’s check for down payments on homes or cars, sizable cash purchases, earnest payments on a home purchase, rent payments, mortgage payments or security deposits.
How do I get a cashier’s check, and where?
Getting a cashier’s check is quite easy. Generally, cashier’s checks are available at most banks, credit unions and through some online banks. You just have to request one and hand over cash or have the funds moved over from your account. Additionally, you may be required to pay a small fee to purchase a check.
To get a cashier’s check, you should:
1. Prepare the information and documents you need to get your cashier’s check.
You’ll need to know the exact amount of the check, the correct spelling of the recipient’s name and have a form of personal identification. If it’s the first time you’re getting a cashier’s check for a particular recipient, make sure you know the account name that needs to be put onto the check.
2. Go to the bank, credit union or visit the online bank’s website.
If you’re getting a cashier’s check online, you’ll need to follow the particular instructions laid out. Once you request your check, it will need to be mailed to you.
If you’re getting one in person, you simply take your documents and information to one of the tellers inside the bank or credit union. These transactions can usually be completed at the teller window and do not require you to sign in to see a dedicated banking agent. Make sure you bring money for the check fee, as this will be due at the time the check is printed.
Cashier’s check vs. certified check
A certified bank check is similar to a cashier’s check but does have some marked differences. With a cashier’s check, the funds come from the bank’s accounts when the check is cashed. With a certified check, the funds come from your account. The bank will sign the check certifying that the funds are available in your account, but the check is still coming from you.
In most instances, the bank will put the funds aside in your account until the certified check is deposited by the recipient to ensure you don’t spend them before the check has been cashed. While a cashier’s check is a bank check, a certified check is still a personal check — albeit a more secure one.
The two types of checks are used for most of the same purposes. The deciding factor on when to use a cashier’s check vs. certified check will depend on the requests of the seller, lender or business.
Cashier’s check vs. money order
Money orders are similar to cashier’s checks except for the amount the checks can be issued for, where you can get one and the costs. Money orders are available at many retail locations like Walmart, the post office and Western Union. Generally, the maximum you can purchase a money order for is around $1,000. Compared to cashier’s checks, money orders may be less expensive, unless your bank offers free or reduced-fee cashier’s checks to account holders.
Both cashier’s checks and money orders offer relatively the same levels of protection and benefits to recipients. That being said, the cap on dollar amounts for money orders limit the available uses. You will need to use a cashier’s check for larger transactions like down payments, earnest payments and larger security deposits. Money orders, though, may be a good option for paying bills for customers without bank accounts looking for the least expensive way to pay.
Cashier’s check vs. personal check
There are significant differences between cashier’s checks and personal checks. You are the guarantor of the funds with a personal check, and funds are taken from your account when the check is cashed. With cashier’s checks, the bank is the guarantor and the funds are taken from its account upon cashing. Overall, cashier’s checks are much safer for businesses and the recipients because the funds are guaranteed by a much larger institution.
Personal checks can still be used for smaller transactions when funds aren’t immediately needed, at some retails stores or when the check-writer is well known and trusted by the recipient.
Is my money safe in a cashier’s check?
Your money is relatively safe in a cashier’s check. Only the person or business printed on the cashier’s check can cash it. If you lose the check, you will want to contact the issuing financial institution about how to get the funds transferred back to you.
You’ll also want to contact the issuing financial institution to get a refund on a cashier’s check that you no longer need. The bank or credit union may instruct you on how to endorse the check to cash it yourself, issue you another cashier’s check written to you or refund the funds to your account if you bank with the company.