Most of our payments go through credit or debit cards.
But you might need to use a cashier’s check.
They’re popular for larger transactions because they’re considered one of the safest payment methods by banks and vendors. If a payment is too large to go through your credit card, you’ll probably need to use a cashier’s check instead.
If you’ve been asked to provide “certified” funds for a down payment or other purchase, the vendor likely wants a cashier’s check or money order as a way to ensure that they will receive their money.
Don’t worry about figuring out when to use a cashier’s check, the recipient will tell you if they need one.
What’s a Cashier’s Check and How Does it Work?
A cashier’s check is a paper check written from the bank’s funds. The biggest difference between a cashier’s check and a regular check is that the funds are guaranteed by the bank, not the account holder.
When you purchase a cashier’s check, the bank will either remove the money immediately from your account or place a hold on your account for that amount. Vendors prefer cashier’s checks for payments since they clear faster than a personal check. Personal checks can take up to a week to clear, as can debit card purchases. Since the bank already “certified” the funds for a certified check, the recipient has nearly instant access to their payment.
Cashier’s checks are essentially a pre-paid piece of paper. You exchange money for the check. You take the paper check to the recipient and they turn the paper check into cash by depositing it at their financial institution. It’s a way to guarantee that the funds will be available when you hand over the check.
A cashier’s check looks more complex than a regular check as well. Beyond your name, address, and payment amount, it will have tracking information and be signed by a bank representative. Additionally, cashier’s checks also have at least one security feature like special ink, special paper, a security strip and/or watermark.
When to Use a Cashier’s Check
Cashier’s checks are used for larger transactions where the recipient wants to know that they’re guaranteed payment. Situations in which the vendor might specifically ask for a cashier’s check include:
- Down payment for a car
- Earnest money for a home offer
- Down payment on a home loan
- Large cash purchase
- Rent or mortgage payment
With major purchases like these, the odds of a normal check bouncing go way up. Not many people have tens of thousands of dollars sitting in their checking account. A cashiers check avoids any problems ahead of time. The recipient doesn’t have to worry that the payment they received will bounce and you don’t know to worry about overdrafting your bank account.
There are some payment options that are similar to the cashier’s check. A money order operates in a similar manner as a cashier’s check, but you can purchase them at a grocery store or a post office. Money orders are less expensive, but they typically have a dollar limit so they may not work well for a very large down payment or purchase.
Banks also offer counter checks. Counter checks are much like personal checks but banks offer them as a service to customers who have run out of their own checks. They are less secure than personal checks and cashier’s checks because they don’t include your name and address.
Where and How to Get a Cashier’s Check
You can only purchase cashier’s checks from a bank. The most common way to purchase a cashier’s check is to visit your local branch and request a check from the teller. Some banks may allow you to purchase a cashier’s check over the phone or via their online teller service. They may be able to send the check directly to the recipient for you.
When you arrive at the bank, you’ll need to provide identification, usually a photo ID or account password) You should also know the name of the company or individual you are paying so the bank can put this on the check. You cannot request a blank cashier’s check for security reasons.
When you get a cashier’s check, the bank will freeze the funds in your account or remove them immediately. Some banks will hold a slightly higher amount than your check to ensure there’s ample funds available, but you’ll get the difference back once the check clears.
If you don’t have an account with the bank, you can still purchase a cashier’s check with a cash payment.
Banks charge a fee for cashier’s checks. Rates for cashier’s checks vary widely from as low as $3 up to $10 or more. If possible, purchase a cashier’s check from a bank where you have an account as they may offer lower fees for members.
What to do if You Lose a Cashier’s Check
Losing a cashier’s check might seem like the end of the world. Fortunately, you can get the money back.
If you lose a cashier’s check, notify your bank immediately. In most cases, they’ll ask you to fill out a statement confirming that the check is lost. The bank can cancel the check, but you’ll most likely be asked to pay a fee. Finally, the bank will likely ask you to purchase an indemnity bond before replacing the check. The bond protects the bank from responsibility in the event that the check is lost or damaged again.
The bank may then reissue your check, but it may take between 30 and 90 days before the money is returned to your account.
Alternatively, you could ask your bank to just cancel payment on the check. Some banks will cancel payment for a fee but you may have to way up to six months before the money is refunded to your account.
Recipients must deposit a cashier’s check within 120 days for most lenders. If a cashier’s check is not cashed within a certain amount of time, the financial institution will turn it over to the state as unclaimed property.
Considerations Before Getting a Cashier’s Check
Cashier’s checks are a convenient way to make large purchases, but there are some things to think about.
First, cashier’s checks are a great option for larger purchases, but they’re not great for everyday payments. The cost of a cashier’s check usually outweighs the benefits when using a cashier’s check for smaller amounts. Cashier checks are very common in real estate and other loan transactions.
But lots of sellers won’t accept them since they’re often used in scams.
Scammers often ask for cashier’s checks because they can access funds quickly and many people believe they’re entirely safe. But they’re not as secure as many believe.
One of the most common ways a scammer will try to steal money is to purchase an item and send you a cashier’s check for more than the amount they offered. They’ll tell you that they need you to cash the check and send the difference to someone else.
When you deposit the check, the bank thinks the check is real and credits your account. You send the “extra” cash to the buyer before the bank realizes the check is a fake, reverses the deposit, and makes you pay the money back to the bank.
Other scams include mystery shopping scams, “work-at-home” check processing, lottery winning scams, and fake renters.
You should never send a cashier’s check or accept a cashier’s check from someone you don’t know or trust. If you’re concerned about a possible scam, talk with your bank and ask them to let you know when a check clears before you spend the money.
Be aware that if you are a victim of cashier’s check scam, you are responsible for replacing any money the bank put into your account when they “cashed the check.” Most financial institutions have little recourse for victims, and your only chance of getting your money back is to find the person who defrauded you.
The last thing you should consider is whether another payment option would be better suited to your needs. If you’re uncomfortable handling a printed cashier’s check, you may be able to use a wire transfer or make an online payment.
Cashier’s checks are just one way you can secure funds for a large purchase. While they can make shopping and paying for real estate or automobiles more convenient, use caution when accepting cashier’s checks and make sure you trust the recipient of a cashier’s check so you can reduce your risk of losing your hard-earned money.