Checks may not be as common as they once were, but there’s one kind of check that remains a gold standard in financial transactions: a cashier’s check.
If you’ve never heard of one before or are not sure how they work, you are probably not alone. Cashier’s checks aren’t typically used in most people’s daily banking.
Guaranteed by the bank, these checks are used for special kinds of transactions. They are typically a faster and more secure way to make a payment than using a credit card or writing a personal check. You may need to use one when you’re making a large purchase, putting a downpayment on a home, or completing another major transaction.
Read on to learn more about this financial tool, including answers to these questions:
• What is a cashier’s check?
• When should you use a cashier’s check?
• How much are fees for a cashier’s check?
• How can you get a cashier’s check?
• Are there cashier’s check scams?
Here’s the lowdown.
How Does a Cashier’s Check Differ From Other Checks?
Unlike a personal check, a cashier’s check is a check that is issued by the bank or credit union, rather than the buyer (or payer).
Sometimes called an “official bank check,” the funds from a cashier’s check are drawn against the bank’s account rather than the payer’s personal account. This means the bank stands behind the check and guarantees that the recipient, or payee, can deposit or cash it and receive the promised funds.
Here are some more specifics:
• The person who deposits a cashier’s check generally runs a much lower risk of having the check bounce. In addition to the frustration this can trigger, bounced checks can lead to hefty fees for both parties in the transaction.
• Cashier’s checks are also considered more secure than personal checks because they are generally harder to forge. Cashier’s checks will have several security measures in place, such as watermarks and color-changing ink, making the possibility of a counterfeit more rare.
• Cashier’s checks are typically faster than a personal check in terms of when the money also gets transferred to another account. With personal checks, the money doesn’t leave a person’s bank account until the payee cashes the check. That could be days, weeks, or sometimes never (in the event the check gets lost).
But, when a person goes to the bank to get a cashier’s check, the amount is immediately transferred out of their account and into the hands of the bank. You can think of a cashier’s check like a prepaid check.
The Original Check
Curious about how cashier’s checks came into being? They date as far back as the 1500s in Holland. As an international center of trade, Amsterdam was home to merchants and banks, and many of them didn’t want to lug around bags of cash to conduct business.
Instead, banks held onto customer’s money and when they needed to pay for something, the teller (then called the “cashier”) at the bank would write a check or bill for that amount.
As they say, the rest is history. Check writing was adopted across the continent and evolved from there. Soon, cashiers weren’t the only people writing checks; account holders could too. Then we evolved to having today’s checkbooks.
Recommended: A Complete Guide to Ordering Checks
When to Use a Cashier’s Check
Cashier’s checks can be used in a variety of transactions, but they’re most likely to be used in one of the following scenarios:
High Dollar Payments
Because of their relative security, cashier’s checks are typically used for larger ticket transactions and payments between people (or businesses) that don’t know each other. For instance, if you were buying a used car from a stranger who listed it online, a regular check might not be sufficient. A cashier’s check could be a better option.
Instead of hoping that a buyer has funds available in their checking account, a person can be reasonably confident that a bank has enough cash on hand to pay what’s needed.
Real Estate Transactions
Cashier’s checks are often used in real estate transactions because they’re generally paid out faster than personal checks. The money is guaranteed, and the transaction is more secure.
These checks are often required when a person is making a down payment on a home. Also, a landlord might ask for a cashier’s check for the security deposit on a rental.
In Lieu of Cash
Not unlike ancient merchants, people might use cashier’s checks today to avoid dealing with stacks of cash.
If someone buys something pricey off an online second-hand marketplace, like a boat, the seller might ask for payment to be made in a cashier’s check instead of cash, so they don’t have to count the bills.
When Personal Checks Are Not Accepted
When personal checks are not accepted at a business, the store still might accept a cashier’s check. It can be worth asking if you find yourself in this situation and don’t want to pay in cash.
Cashier’s Check Fees
Cashier’s checks typically aren’t free. You’ll likely have to pay for the privilege of having one created for you. Depending on the policy of the bank or credit union, the cost of getting a cashier’s check can run around $10.
The fee is due at the time of writing the check. In order to cover that cost, the payer will need to have the extra money in cash or available in their bank account, so it can be directly deducted from the account.
There usually is no fee involved for depositing a cashier’s check, however.
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How to Get a Cashier’s Check
Wondering where to get a cashier’s check? You can get one at a bank or credit union, either in person or online.
If you’re going to a brick and mortar bank location, getting the cashier’s check issued shouldn’t take more than a few minutes, provided you have all the required information and documents.
Most banks will only write cashier’s checks for customers who have an account with them. If a credit union member wants a cashier’s check, they can usually get one from any credit union, not just the one they bank with, but ask beforehand to be sure.
If you don’t have a bank account, you may be able to have a cashier’s check written at a financial institution, but you will likely have to bring the funds in the form of cash. For large amounts, this can obviously be challenging.
Some online banks allow their customers to request a cashier’s check online. However, this isn’t as speedy as the process inside a bank branch. Customers will need to request the check, then wait for it to be mailed to them.
The process of getting a cashier’s check will vary based on a person’s bank or credit union. However, a person will generally need:
• Money in their account. Remember, a cashier’s check immediately deducts funds from the payor’s checking account. That means they’ll need to have the funds available when they write the check. Alternatively, some banks and credit unions allow customers to bring in cash to be converted to a cashier’s check.
• A valid ID. Typically, a person needs their license, passport or other government-issued photo ID to confirm their identity.
• Payment information. A person will need to tell the bank exactly how much the check is for. It is important to have the precise amount because that number is printed on the check and cannot be changed.
You also need the name of the payee (the person or business the check should be payable to), and any other details (for example, you may want to add a “memo” or note on the check, such as a reference number).
The Difference Between Cashier’s Checks and Money Orders
Similar to a cashier’s check, money orders are guaranteed funds.
However, money orders can be purchased at many different locations. This includes banks and credit unions as well as post offices, grocery stores, drug stores, and check cashing companies.
On average, money orders have lower fees than cashier’s checks — often customers will only pay a few dollars per order. But money orders also have a limit on their value, they can typically only be made up to $1,000. If you’re trying to put a down payment on a house or buy a used car, this may not cover the amount needed.
If a person doesn’t have a bank account, they may choose to use money orders when transactions require secured funds.
Money orders may seem preferable to cashier’s checks, since they are often cheaper and available in more locations. However, one of the most significant differences between the two is availability of funds.
While cashier’s checks and money orders both guarantee funds, money orders will typically take a little longer to deposit. Generally, with a cashier’s check, a person can expect up to $5,000 within a day. However, with a money order, only $200 may be available within 24 hours after it’s deposited.
Additionally, if the transaction is over $1,000, it might not make sense to use money orders. For example, if someone needs $5,000 in certified funds and the money orders cost $3 each, it would cost $15 in fees. Contrast that with a single cashier’s check, where it might just cost $10 in fees.
Both cashier’s checks and money orders are secure methods of payments, but when the payee needs the funds immediately, they might require a cashier’s check.
Beware of Cashier’s Check Scams
When they’re legitimate documents issued by a bank or credit union, cashier’s checks are relatively safe. If you are selling something of value, you can typically view a cashier’s check with confidence because the bank promises to pay — not just the person who hands you the check.
Unfortunately, not all cashier’s checks are legitimate.
There’s a common scam, according to the Federal Deposit Insurance Corporation (FDIC) , involving what appear to be cashier’s checks. Here’s how they usually unfold:
• The fraudster sends payment in the form of a cashier’s check for more than the agreed upon amount. The scammer will ask you, the payee, to cash it anyway and simply send the excess money back to them (or to somebody else).
• Because your bank assumes the check is valid, it allows you to withdraw the funds. You likely would go ahead and send the overage back, as directed.
• The check is then discovered to be fake, your bank reverses the deposit, and you have been cheated out of that overage amount. Some banks also charge the depositor a returned item fee, even if the account doesn’t overdraw.
Once a victim of this type of fraud sends money to a thief or spends the money, they often have no recourse other than to try and find the scammer themselves — which may not be easy, and might require hiring private help.
Your bank typically does not help. Local police often lack the resources to track down a scammer who may be in another country.
Another kind of bank fraud to watch out for: forged or fake cashier’s checks. With a good printer and advanced graphic-editing skills, some forged cashier’s checks can fool even a seasoned bank teller.
To help combat potential fraud when receiving a cashier’s check from a stranger, it’s a good idea to inspect it prior to depositing it. Look for typos, a bank phone number (check that it works), and common security features like watermarks and a security thread (a thin embedded strip you can detect when the check is held up to light).
Payees can also play it safe by waiting for the check to be completely verified and deposited before spending it (which can take up to two weeks for some cashier’s checks).
Another safeguard is to only accept exact payments in a cashier’s check. If you must take a check for more than the amount due, you may want to inform the seller that you’ll wait at least two weeks before returning any of the money.
Recommended: How to Verify a Check Before Depositing
Cashier’s checks are checks that banks issue and guarantee, and they are often needed for large purchases, like a car, or the down payment on a house. These checks are printed by your bank or credit union and include the name of the recipient (or payee) and the amount of the check.
When compared to personal checks, cashier’s checks are generally more secure for sellers because the checks shouldn’t bounce. But sellers need to be on the lookout for fakes, which can cause serious problems.
Cashier’s checks might be the norm for some transactions, but there are other secure ways to send money. With a Checking and Savings online bank account with SoFi, users can send money quickly and securely to anyone right from the app. All you need to initiate a transfer, is the receiver’s phone number or email.
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How can you get a cashier’s check?
Cashier’s checks are available both online and in-person from your financial institution. You will need to be able to verify your ownership of your account as well as provide details on the amount of the check and exactly to whom it should be written.
What’s the purpose of a cashier’s check?
A cashier’s check is a fast and secure form of payment, typically used for big-ticket items like the down payment on a house or buying a car or boat. With these checks, the bank, not the account holder, is guaranteeing the funds, making them significantly more reliable than standard checks.
How safe are cashier’s checks?
Because cashier’s checks are guaranteed by the bank writing them, they are a very secure form of payment. That said, it’s important to be aware of the scams out there in which forged and fraudulent documents that look like cashier’s checks are used. Educate yourself about these scams so you can avoid getting cheated.
Photo credit: iStock/TARIK KIZILKAYA
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