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A cashier's check is a type of payment that offers guaranteed funds to the recipient. They're often used for large purchases, such as buying a car or making a down payment on a house.
Read on to learn more about how a cashier's check differs from a personal check and a money order, when you might need it, and how to get one.
How Cashier's Checks Work
A cashier's check functions similarly to a personal check but with one key difference: Instead of you guaranteeing the check, the bank or credit union that issues it does.
As a result, cashier's checks are often required when you are making large purchases in which the seller needs a certain level of certainty. Because they're one of the safest forms of payment available, they also tend to clear more quickly than personal checks, making them an excellent choice when the seller wants quick access to the funds.
In addition to a bank or credit union guarantee, cashier's checks also typically come with special security features, such as a watermark or signatures from two bank or credit union employees, making them difficult to counterfeit.
When to Use a Cashier's Check
While home and car sales often involve cashier's checks, you'll generally use them in any situation where the seller requires it to complete a transaction.
That said, there may be other payment options in some situations, so it's important to know when to use a cashier's check instead of a similar option, including certified checks and money orders.
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 that goes beyond a non-certified personal check, 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 where cash is impractical. But it may not be enough if the seller specifically wants the safety of a cashier's check.
A money order is another form of payment that provides more security than a personal check, but it also has some key differences from a cashier's check.
Like a cashier's check, a money order is prepaid and isn't only guaranteed by the person buying it or their checking account. But unlike a cashier's check, it's guaranteed by a third party, such as Western Union, the post office or a retailer, and not by a bank or credit union.
Also, money orders typically have a $1,000 limit. So if you need to send money securely or make a utility or rent payment, a money order may suffice. But you're limited on how much you can pay, making cashier's checks a better option if you need to make a large purchase.
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 a 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.
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 amount. This means you'll need to have all the information ready to give the teller because you won't get a blank check.
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 it's complete and you have the check in hand, make sure to also ask for a receipt. A receipt may be helpful if you need to track the check.
What to Watch Out For
In general, cashier's checks are among the safest payment methods available. But even with the security features they include, they're not entirely impervious to fraudulent activities.
If you're the recipient of a cashier's check and you don't know the person who gave it to you well, 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 conditional upon the check clearing instead of when the buyer hands it to you.
Also, keep in mind that if you lose a cashier's check, the bank will require you to purchase an indemnity bond before it issues a new check. The bond ensures that you will be liable for the original check instead of the bank. You can 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
While cashier's checks are a safe way to send money or make a payment, they're not always necessary. Because some banks charge a fee to create a cashier's check, check with the recipient to see what other options are available. If you can complete the transaction with a less expensive and complicated option, you may be able to save 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 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.