What Is a Cashier’s Check and How Does it Work?

What Is a Cashier's Check and How Does it Work? article image.

A cashier's check is a type of payment that offers guaranteed funds to the recipient. It's often used for high-dollar transactions, such as buying a car or making a down payment on a house.

Here's how a cashier's check differs from a personal check, certified check or money order, as well as how to get one and when you might need to.

How Do Cashier's Checks Work?

A cashier's check works like a personal check but with one key difference: Instead of the check being guaranteed by money in your bank account, it's guaranteed by the bank or credit union that issued the check.

In addition to having a bank or credit union guarantee, cashier's checks also typically come with added security features, such as a watermark or signatures from two bank or credit union employees.

When you request a cashier's check, you'll pay the financial institution that issues it, either with cash or a withdrawal from your bank account. The check is then issued to you, with the name of the person or business you're paying in the recipient line. You cannot get a blank cashier's check.

Cashier's checks are often required when you are making large purchases in which the seller needs a high level of certainty that the check won't bounce.

Because they're one of the safest forms of payment available, they also tend to clear more quickly than personal checks—usually by the next business day. However, larger checks may be held for longer than that to ensure that they're not fraudulent.

Cashier's Check vs. Certified Check vs. Money Order

While some recipients may require a cashier's check to complete a transaction, you may be able to use a certified check or money order instead in some situations.

Certified Check

A certified check is a type of personal check that's drawn from your account rather than the bank's or credit union's reserves. But as added security, the issuing bank or credit union certifies that funds were available for the amount of the check at the time you wrote it.

The bank or credit union also verifies that the signature on the check is genuine and sets aside the amount to be used only for that transaction. That action essentially guarantees the check won't bounce.

A certified check may be a good option when the purchase is large enough that you can't use a money order, and using cash or a personal check would be impractical.

Money Order

A money order is another form of payment that provides more security than a personal check.

Money orders are similar to cashier's checks in that they are both prepaid and guaranteed by the issuer of the check instead of the person buying it. With a money order, however, the guarantor is typically a company like Western Union, the U.S. Postal Service or a retailer like Walmart, and not a bank or credit union.

Money orders are also typically more convenient to buy versus a cashier's check or certified check due to their wider availability. If you need to send money securely or make a utility or rent payment, a money order may suffice. Money orders typically have a $1,000 limit, however, which means it may not be an option if you need to make a large purchase.

When You May Need a Cashier's Check

Cashier's checks may be required on certain large transactions, such as when you're buying a car, motorcycle, boat or RV from a private party or dealership. It may also be possible to use one to close on a home purchase, though the title company may request a wire transfer instead.

If you're making a large purchase like a vehicle or home, ask the seller, dealership or title company about the payment methods they accept.

How to Get a Cashier's Check

You can get a cashier's check from any bank or credit union, but you may be required to be an existing customer to buy one. Whether you're heading into a local branch or submitting your request online, here are some steps you'll need to take.

1. Have the Money Ready

Because the bank or credit union guarantees a cashier's check with its own funds, it'll require you to pay the amount of the check upfront. You can do this with cash or funds from your own checking or savings account. In some cases, you may be required to pay a small fee.

If you want to withdraw the funds for a cashier's check, though, you may be required to provide some form of identification.

2. Provide the Check Details

The bank or credit union prints off the cashier's check, including the recipient's name and the amount of the check. This means you'll need to have all the necessary information ready to give the teller.

3. Ask for a Receipt

Once your request is completed, the bank will either freeze the amount of the check or deduct it from your account balance, plus any applicable fees. Once you have the check in hand, make sure to also ask for a receipt, which may be helpful if you need to track the check or if it goes missing.

Best Practices When Giving or Receiving a Cashier's Check

In general, cashier's checks are among the safest payment methods available. But even with the security features they include, they're not entirely immune to fraud. Here are some best practices to keep in mind.

When Receiving

If you don't know the person who gave you the check, it's best to avoid using the funds until after the check clears with your bank. This typically only takes a day, but it can take longer depending on the bank and the amount of the check. Avoid buyers who want to give you a cashier's check for more than the purchase price or who offer you checks with misspellings or no security features. These are both signs of common cashier's check scams.

If you're receiving the check in the sale of a car or something else that's valuable, consider making the sale contingent upon the check clearing instead of when the buyer hands it to you. If the buyer refuses, you can always look for someone else.

When Purchasing

If you purchase a cashier's check and lose it before giving it to the recipient, the bank will require you to purchase an indemnity bond before it issues a new one. The bond ensures that you will be liable for the original check instead of the bank if it's found and used for payment. You can also purchase an indemnity bond from select insurance companies, but it's not easy to get one, so safeguard the cashier's check like you would cash.

Know When to Use the Right Payment Method

Cashier's checks are a safe way to send money or make a payment, but they're not always necessary. Because some banks charge a fee to issue a cashier's check, check with the recipient to see what other options are available. If you can complete the transaction with a more convenient and less expensive option, you may be able to save both time and money.

If you do need a cashier's check, though, make sure you have the money and the information required, and treat the check the same as you would cash until you hand it to the recipient. At that point, they're responsible for its safekeeping until they deposit or cash it.

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