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.