What is a Cashier’s Check?
A cashier’s check is a secure form of payment issued by a bank or other financial institution. It is written and funded directly from the bank’s own account and signed by one of its representatives. The check is payable to a specified recipient, often offering greater security and reliability compared to personal checks.
How Does a Cashier’s Check Work?
When a customer requests a cashier’s check, they must provide the bank with the full amount of the check plus a small service fee. The bank will then draw the funds from its own account to cover the check’s amount. This ensures that the recipient can trust the check will clear because the bank itself guarantees payment. For this reason, cashier’s checks are often used in large transactions where payment certainty is critical.
Cashier’s Check vs. Certified Check
Unlike personal checks, which can bounce due to insufficient funds, cashier’s checks offer strong payment guarantees. Here are key differences between cashier’s and certified checks:
- Source of Funds: A cashier’s check is drawn on the bank’s account, whereas a certified check is drawn on the customer’s account but guaranteed by the bank.
- Security: Both are considered secure, but the cashier’s check often adds an extra layer of assurance because it uses the bank’s own funds.
- Stop-Payment Orders: It is generally harder to place a stop-payment order on a certified check compared to a cashier’s check.
By understanding these differences, individuals can choose the best payment method for transactions requiring a higher level of security and reliability.
Related Terms: certified check, personal check, financial institution.
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### What is a cashier's check primarily used for?
- [ ] Personal finance for regular purchases
- [ ] Credit card bill payments
- [x] Secure, large transactions
- [ ] Small, everyday expenses
> **Explanation:** A cashier's check is typically used for larger, significant transactions where the recipient wants to ensure the funds are available. This is because the amount is drawn from the bank's own account and guaranteed by the bank, making it more secure than a personal check.
### How does a cashier's check differ from a personal check?
- [x] The funds are guaranteed by the issuing bank
- [ ] It can be written by the payer directly without a bank
- [ ] It is less secure for the recipient
- [ ] A cashier's check is not recognized by banks
> **Explanation:** Unlike personal checks, cashier's checks are written and guaranteed by the issuing bank. The funds are secured in the bank's account and then signed over to the recipient, assuring that the recipient will receive the specified amount.
### Who signs a cashier's check?
- [ ] The customer who purchases the check
- [x] A representative of the issuing bank
- [ ] The recipient of the check
- [ ] The bank manager
> **Explanation:** A cashier's check is signed by a representative of the issuing bank, not by the customer. This signature from the bank ensures that the funds are available and secured in the bank's account.
### Can a stop-payment order be applied to a cashier's check?
- [ ] No, never
- [x] Yes, but it is uncommon
- [ ] Yes, it is common and easy to apply
- [ ] Only if the check is under a certain amount
> **Explanation:** While it is possible to place a stop-payment order on a cashier's check, it is generally uncommon and more complicated compared to personal checks.
### What additional fee is typically involved in acquiring a cashier’s check?
- [ ] No service charge
- [x] A small service charge
- [ ] A large commission fee
- [ ] A credit card processing fee
> **Explanation:** When purchasing a cashier's check, the customer usually has to pay the bank the full amount of the check along with a small service charge for the processing and guaranteeing of the funds by the bank.
### What ensures that a cashier's check will not bounce?
- [x] The amount is secured in the bank's account before the check is issued
- [ ] The customer's promise
- [ ] The recipient's bank verifies the funds before acceptance
- [ ] Personal credit checks of the customer
> **Explanation:** A cashier's check is funded by the bank and the amount is secured in the bank’s account before the check is issued, making it unlikely to bounce. The bank guarantees the availability of funds, providing assurance to the recipient.
