What Is a Certified Check?

So, you’re closing an important transaction when the seller asks you to pay by certified check. Fine, you say — but what is a certified check?

It’s a personal check written by an account holder, drawn on the holder’s account and guaranteed by the bank.

With a certified check, the bank or financial institution certifies that the signature is genuine and that the account holder had enough money in the account to cover the check at the time it was written. The bank then sets aside the full amount of the check to guarantee the funds will be available when the check is cashed or deposited. The guarantee that money will be available is one feature that a certified check shares with another bank product, the cashier’s check.

Many banks or credit unions offer certified checks to their patrons. Fees can run from $2 to $10, with the possibility of higher fees for larger checks. Some financial institutions, however, offer reduced fees or no fees for account holders or premier account holders.

Why use a certified check?

In some financial transactions, especially larger ones, paying with cash can be impractical for buyers, and accepting payment by a regular personal check can be risky for sellers — especially if they have doubts about a buyer’s ability to pay. A certified check can reduce risks for everyone in such a transaction.

“The whole purpose of a certified check is to ensure the person who’s getting paid that there’s money behind the check,” says Nessa Feddis, senior vice president at the American Bankers Association.

“The [check] recipient is looking for some guarantee of getting paid. If I’m selling my car and I’m handing it over, and if they give me a personal check, that check may come back as uncollectible and I can’t get the car back.”

Certified check vs. cashier’s check

So, how is a certified check different from a cashier’s check? They’re actually very similar.

Both fall under the definition of what banks call an “official check”; both are used instead of cash, credit or personal checks; and both are used to guarantee payment. And, with rare exceptions, the purchaser can’t stop payment on either check.

There is one significant difference, however.

With a cashier’s check, the bank or financial institution receives money from the purchaser, then issues the check and guarantees its payment at face value. Funds are drawn against the bank, not against a personal account, as is the case with a certified check.

Still, like any other form of payment, cashier’s checks and certified checks are susceptible to fraud, and it’s your responsibility to make sure the check you receive is legitimate and not counterfeit.

You might think it’s easy to spot a phony check. But while some red flags — such as typos and grammatical errors — are easy to spot, most bad checks don’t have dead giveaways. With technology, counterfeiters can easily copy bank logos and branding off the Internet.

Don’t take any chances. Banking security experts warn that it’s tough to recognize a fake and recommend that you call the bank immediately upon receiving the check to verify that it’s legitimate. Don’t call the number printed on the check, though; it could be phony, too. Find the bank’s phone number online, call it, and then give the bank the check number and the name of the purchaser.

Under banking regulations, deposited funds are typically available as soon as the next business day. But if you happen to deposit a cashier’s check, withdraw the funds, and send out the money or merchandise, only to have the bank discover that the check was fraudulent, you may be held responsible for the entire amount of the bad check. Take steps to avoid being scammed.

The bottom line

Because their face value is guaranteed, legitimate certified checks are good as cash money. They can help ease your mind when exchanging goods or services in a large transaction. But as with any situation involving your money, be careful and avoid falling victim to counterfeiters.

Fees for certified checks and cashier’s checks at selected financial institutions

Not all banks and credit unions offer both types of checks, and some banks differ on terminology, calling them “official checks.” Check with your financial institution.

Ally Bank

Doesn’t currently issue certified checks. Says customers can call the bank to request a cashier’s check at no charge.

Associated Bank

Cashier’s checks: $8 for account holders. Banks says its cashier’s checks are also certified.

Bank of America

Cashier’s checks: $10 for account holders; $20 for non-customers. No longer certifies checks.

Bank5 Connect

Cashier’s checks: Free. Does not offer certified checks.

BBVA Compass

Cashier’s checks: $8 for account holders. Does not offer certified checks.

Connexus Credit Union

Certified cashier’s check: $3.

Consumers Credit Union

Certified checks and cashier’s checks: $2 for amount under $500; free for check over $500.

Key Bank

Cashier’s check: $8; bank says it’s the same as a certified bank check.

Navy Federal Credit Union

Two free cashier’s checks per day; additional checks cost $5 each. Certified checks not listed.

Pentagon Federal Credit Union

Share withdrawal (bank describes it as a certified bank draft and cashier’s check): No fee.

PNC Bank

Cashier’s checks: Free for account holders.

Southwest Airlines Federal Credit Union

Says its cashier’s checks are the same as certified checks; $2.

SunTrust Bank

Cashier’s checks: $8 for clients and $15 for nonclients.

Certified checks: Fees vary by region. Call your local branch.

TD Bank

Official checks: $8.

Wells Fargo

Certified checks and cashier’s checks: $10; free with PMA Checking.

Juan Castillo is a staff writer at NerdWallet, a personal finance website. Email: jcastillo@nerdwallet.com. Twitter: @JCastilloNerd.

This article originally appeared on NerdWallet.





Sunil Sethi / Broker, President, REALTOR, Green, MBA, CPA (inactive)
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