Checks issued and guaranteed by banks are known as cashier's checks. The name of the payee and the amount are printed on paper from your bank or credit union. When the beneficiary cashes the cheque at their bank, they receive funds from your bank.
What Is a Cashier's Check?
A cashier's check is more secure than a personal check for the recipient. That's because a bank won't issue it unless there's enough money in the account to back it up. As a result, it's unlikely to bounce. Cashier's checks are generally utilized for high-dollar transactions and payments between entities that do not know each other because of their relative security. You may be pretty confident that a bank has enough cash on hand to pay instead of trusting that your buyer has funds available in their checking account. Alternate names: Bank drafts, bank checks, teller's checkHow Does a Cashier's Check Work?
Before printing a cashier's check, banks and credit unions must have the funds on hand. The bank produces and provides you a check that is payable only to the business with which you are transacting. The money is promptly withdrawn from the customer's account by the bank. It saves this money and, as a result, can ensure that the check will clear. This gives the recipient peace of mind when they are selling anything, such as a used car. On the other hand, a personal check will only clear if the money in the checkwriter's account is accessible when the recipient attempts to deposit or cash the check. The recipient can use the funds immediately after depositing a cashier's check. Typically, the first $5,525 must be provided within one working day. Banks can still hold balances over $5,525, or any other amount they think may be troublesome, but cashier's checks clear faster than personal checks. Cashier's checks are ideal for transactions requiring speedy settlement of payments. You may see money in your account after depositing a check, but you won't be able to take it entirely until the bank "clears" the transaction. Personal checks can take several days or weeks to clear, whereas cashier's checks are usually apparent within one business day.Do I Need a Cashier's Check?
Because real estate down payments often include such substantial sums of money, a cashier's check can be used. Similarly, brokerage houses may demand settled funds for certain transactions; however, you may be able to pay with a cashier's check. You can also accept a cashier's check if you're privately selling something with a high price tag. For additional security, meet the person at the bank and conduct the transaction there.Alternatives to Cashier's Checks
Money orders are similar to cashier's checks in that they can be used to make purchases. They are considered "secure" payment methods because they can only be purchased with cash (or cash-like instruments such as a debit card or cash advance on a credit card). As a result, unlike personal checks, they should not bounce (or be returned unpaid). On the other hand, money orders come from a variety of issuers. Money orders can be purchased at post offices, retail outlets, transfer companies, banks, and credit unions. A wire transfer is another option for making a payment. Wire transfers transport money from one bank account to another through secure electronic messaging through the banking system. Money orders have maximum issue restrictions; therefore, they may only be suitable for minor transactions. If you need to send money to someone urgently and don't want to use the banking system, you might use Western Union.Cost of a Cashier's Check
A cashier's check will cost you anywhere from $5 to $15. The cost is determined by the bank you select and whether or not you have an account. Many financial organizations provide cashier's checks as part of their account subscriptions, while others may charge a modest fee to account holders. If you don't have a bank account with the bank from which you're acquiring a cashier's check, you'll need to be able to pay the check's face amount plus any costs at the time of purchase.Advantages and Disadvantages of Cashier's Checks
Pros- Payment is guaranteed
- Availability of funds
- It leaves a financial trail
- Easy to counterfeit
- Funds might be available too quickly.
- Extra costs
Pros Explained
Guaranteed Payment: If you bank with the bank that issued your cashier's check, they will move money from your account to theirs. If you don't, you'll have to pay the amount you've requested on the check. The recipient can be more confident in the check because they know the monies are in the bank. Fund Availability: If the cashier's check is less than $5,525 and you deposit it in person, the funds are usually ready the next day. You might not be able to access the funds the next day in some cases. If you deposit a check on Friday, the money does not have to be available until Monday. Unless there is a hold for any reason, they should be available on Friday if you placed them on Thursday. Creates a Money Trail: The amount and bank record the amount and checks information of a cashier's check. The receiving bank follows suit, leaving a paper trail that may be traced if an issue arises.Cons Explained
Accessible to counterfeit: Despite the fact that cashier's checks are one of the most secure payment methods, they can nevertheless be utilized in counterfeiting and scam operations to steal money from people who rely on them. Funds available too quickly: While having access to funds the day after cashing a check is convenient, it can present complications if you withdraw the money the next day. A few days later, the bank may discover that the check was fake and request that you repay the funds. You'll have lost whatever someone "paid" for in this situation, and you'll owe the bank money. Extra costs: Cashier's checks are expensive. Even if it's only $5 or $10, it's money you could have spent on something else.How to Get a Cashier's Check
Inquire about the prerequisites for ordering a check with your bank. You'll usually need to have cleared funds in your account or deliver cash to the bank. You can get a check from almost any brick-and-mortar bank. You should have a check-in hand in a few minutes and be able to pay the payee right away. Some banks may only issue cashier's checks to account holders, so you'll have to call around and inquire about the restrictions. You can request cashier's checks online from several banks, notably internet banks. Because the bank may only send checks to your verified postal address, you'll have to wait for the check to arrive before forwarding it to the individual you're paying. With shared branching, you can get cashier's checks at practically any credit union facility nationwide (not just your credit union) if you bank at a credit union. Bring your identification and account information. Make sure the credit union you plan to visit, accepts cashier's checks by calling ahead. A cashier's check can be obtained from any bank or credit union. Some organizations, on the other hand, solely issue checks to customers.Key Takeaways
- A cashier's check is a check issued by a bank that guarantees the availability of monies.
- Cashier's checks are appropriate for significant purchases such as real estate or other large purchases.
- Cashier's checks can be replaced with money orders or wire transfers.
- Members of various banks and credit unions can get cashier's checks as a service, occasionally for a cost. Non-members may also be able to receive a check.
Frequently Asked Questions (FAQs)
Do cashier's checks clear right away?
Regular checks clear faster than cashier's checks. It takes one business day on average; however, each bank has its schedule.Is a cashier's check equivalent to a money order?
A money order is obtained with cash from a place like the United States Postal Service. A bank issues a cashier's check, which is paid from the bank's account after the bank withdraws funds from your account. You are responsible for filling out the payee information.