Differences of a Cashier's Check vs. Certified Check

Not all transactions are created equal. Everyday purchases can be easily handled by cash or debit card. But large transactions tend to require something more secure. This is where cashier’s checks and certified checks are useful. But how do they work? Whether you’re closing on a house, buying a car from a private seller, or engaging in any transaction where trust and verification of funds are required, it helps to understand how these forms of payment differ.

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What Is a Cashier’s Check?

A cashier’s check is guaranteed by the bank or financial institution that issues it, providing a secure alternative to personal checks or cash. This guarantee is possible because, unlike a personal check, the funds for a cashier’s check are drawn not from the payer’s account, but from the bank’s own reserves. This means that the recipient can trust the check will not bounce.

Let’s say, as an example, that you’re buying a car from a private seller. You’ve agreed on a price, but the seller requests a secure form of payment to ensure that the deal goes smoothly. In this scenario, a cashier’s check would be preferable to a personal check, which could be subject to insufficient funds, or carrying a large sum of cash, which could be unsafe.

To acquire a cashier’s check, you must first present a valid form of identification to the issuing authority. This is a critical step in preventing fraud. Following identification, you need to either have enough funds in your account, or enough cash on hand to cover the amount.. Once the bank accepts the funds, it will issue the cashier’s check. It is common for banks to charge a service fee for issuing a cashier’s check, which can vary from $5 to $15, depending on the bank and the check amount.

What Is a Certified Check?

A certified check is a payment instrument that provides a higher level of security than standard personal checks. Let’s take the example from earlier. If you’re buying a car and want to ensure that your payment goes through without a hitch, you can use a certified check. To get this type of check, the bank first verifies that you have enough funds to cover the check’s amount. Then, the bank holds these funds, guaranteeing the payment.

Major Differences of Cashier’s vs. Certified Checks

A couple preparing documents for a personal transaction with a cashier's check.

When it comes to making secure financial transactions, cashier’s checks and certified checks are two instruments that provide a higher level of assurance when compared with personal checks.

Cashier’s checks are often deemed more secure due to the bank’s direct involvement and the immediate withdrawal of funds from the bank’s account. The process for obtaining a cashier’s check typically involves the purchaser providing the bank with the amount of the check plus any applicable fees, after which the bank issues the check to the designated payee. Certified checks, while secure due to the bank’s verification, still depend on the customer’s account for funding.

Cashier’s Check vs. Certified Check: Risks and Limits

While cashier’s checks and certified checks are both considered safer than personal checks, they still come with risks. One common issue is fraud. Forgeries are the most common tactic used by scammers. If you deposit a fake check, your bank may initially release the funds. But once the check is found to be fraudulent, the money will be taken back, and you may be held responsible.

There are also limits when it comes to accessing the funds. Even with a legitimate cashier’s or certified check, your bank might place a hold on the deposit, especially if it’s a large amount or from another bank. This delay can affect your ability to use the money right away. So it’s important to ask your bank how long the hold will last before relying on those funds.

If you lose a cashier’s check or certified check, you will need to fill out forms, wait several days or weeks, and possibly pay a fee. Because of this, it’s important to treat these checks like cash and store them safely until they’re used. Even though they offer more protection than personal checks, they still require care and attention.

When to Use Each Type of Check

Cashier’s checks are the preferred method of payment in real estate transactions, when purchasing high-value items like vehicles, or when conducting large business transactions. In each example, the buyer must provide a secure, guaranteed form of payment for substantial amounts, such as a down payment or closing costs. The assurance that the bank stands behind the check makes cashier’s checks a favored option.

Certified checks, while offering less security than cashier’s checks, are suitable for everyday transactions where the payee requires verification of funds but not the full backing of a bank. These checks are often used in personal dealings, such as the private sale of a vehicle, where the seller may insist on a certified check to confirm that the buyer has the necessary funds. They are also used in situations where the payee wants to mitigate the risk of a bounced check, but does not require the heightened security of a cashier’s check, such as when paying for services like home renovations.

Bottom Line

A couple meeting with an advisor to discuss a secure transaction for a purchase.

Cashier’s checks are commonly used in high-stakes transactions such as real estate closings and big purchases where guaranteed funds are required. Certified checks, on the other hand, are used for personal dealings where a lower level of guaranteed funds is required. Both can fulfill your needs, depending on what you’re trying to accomplish.

Tips for Financial Planning

A financial advisor can help you plan for big life events. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
No matter which type of check you use, you’ll want to make sure you have a reliable bank. Check out our guide to some of the best banks in America.