A cashier’s check is a check issued and guaranteed by a bank. The bank or credit union prints a document that includes the name of the payee and the amount. The recipient uses this check to collect funds from your bank when they cash it at their bank.
How does a cashier’s check work?
Banks and credit unions have the funds available before printing the cashier’s check. The bank withdraws this money directly from the customer’s account. The bank holds these funds, thus guaranteeing the check’s cashing. The bank prints a check that can only be cashed by the entity you are transacting with and hands it to you.
This provides security for the recipient who is usually selling something, like a used car. However, a personal check only clears if the funds are available in the account of the person who wrote the check when the recipient tries to deposit or cash it.
After depositing a cashier’s check, the recipient can use the funds almost immediately. The first $5,525 is typically available within one business day. Banks can still hold amounts over $5,525, or any amount they suspect could be problematic, but cashier’s checks are usually verified much faster than personal checks.
Do I need a cashier’s check?
You can use a cashier’s check for real estate transactions, as they are usually large sums of money. Similarly, some brokerage firms may require funds to settle certain transactions, and you might be able to use a cashier’s check with them as well.
You can also accept a cashier’s check if you’re selling something for a particularly high price. Meet the person at the bank and conduct the transaction there for added security.
Alternatives to a cashier’s check
Money orders are similar to cashier’s checks. Money orders are considered “safe” forms of payment because you can only purchase them with cash (or cash-like means such as a debit card or cash advance on a credit card). Therefore, they shouldn’t bounce (or return unpaid) like personal checks.
However, money orders come from different sources. In addition to banks and credit unions, you can also purchase money orders at post offices, retail stores, and money transfer companies.
A wire transfer is another way you can pay for something. Wire transfers use secure electronic messages through the banking system to move money from your bank account to another person’s account.
How much does a cashier’s check cost?
Expect to pay anywhere from $5 to $15 for a cashier’s check. The cost depends on the bank you use and whether or not you have an account. Many financial institutions include cashier’s checks in their account memberships, while they may charge account holders a small fee.
If you do not have an account at the bank from which you are obtaining the cashier’s check, you will need to be able to pay the face value of the check plus the fee at the time of purchase.
Advantages and disadvantages of cashier’s checks
Advantages
- Guaranteed payment: The bank issuing the cashier’s check will transfer the funds from your account to its account if you are dealing with them. If not, it will require you to pay the amount requested from the check. This makes the check more reliable for the recipient as they know the money is held by the bank.
- Funds availability: Funds from a cashier’s check are typically available overnight if they are under $5,525 and you deposited them in person. There are some cases where you may not be able to access the funds the next day. For example, if you deposited the check on Friday, the funds may not be available until Monday. If you deposited it on Thursday, it should be available on Friday unless there is a hold for some reason.
- Create
Financial Series: When you use a cashier’s check, the bank records the amount and the check information. The receiving bank does the same, creating a paper trail that can be followed if a problem arises.
Disadvantages
- Ease of Forgery: Although cashier’s checks are considered one of the safest payment methods, they can be used in forgery and fraud to steal money from individuals who rely on their security.
- Very Quick Availability of Funds: While it’s good to access funds the day after cashing the check, this quick access can cause problems if you withdraw the money the next day. The bank may find that the check was forged after several days and ask you to repay the amount. In this case, you would have lost anything someone paid, and you would owe the bank money.
- Additional Costs: Cashier’s checks cost money. It may only be $5 or $10, but it’s still money you could use for something else.
How to Obtain a Cashier’s Check
Ask your bank about the requirements for requesting a cashier’s check. You usually need to have available funds in your account beforehand, or you need to deliver cash to the bank. You can go to most traditional banks to get a check issued.
Within a few minutes, you should have a check in your hand, and you can pay the recipient immediately. Some financial institutions only issue cashier’s checks to account holders, so you may need to call and ask about the requirements.
Some banks – especially online banks – allow you to request cashier’s checks online. The bank may only send the checks to your verified address, so you would have to wait to receive the check and then deliver it to the person you’re paying.
If you are dealing with a credit union, you can often get cashier’s checks from any nationwide credit union branch (not just yours) thanks to shared branching. Bring your ID and account information with you. Call ahead to ensure that the credit union you plan to visit offers cashier’s checks.
You can go to any bank or credit union and request a cashier’s check. However, some institutions may only issue checks to customers, so you may need to try several different locations (or open an account).
Frequently Asked Questions (FAQs)
Are cashier’s checks verified immediately?
Cashier’s checks are verified faster than regular checks. It usually takes one business day, but each bank operates on its own schedule.
Is a cashier’s check the same as a money order?
A cashier’s check is issued by the bank and money is withdrawn from the bank’s account, which initially withdraws the funds from your account. A money order is purchased with cash from a place like the U.S. Postal Service. The individual fills in the payee’s information themselves.
Source: https://www.thebalancemoney.com/cashier-s-checks-overview-315286
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