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.
Doesn’t currently issue certified checks. Says customers can call the bank to request a cashier’s check at no charge.
Cashier’s checks: $8 for account holders. Banks says its cashier’s checks are also certified.
Cashier’s checks: $10 for account holders; $20 for non-customers. No longer certifies checks.
Cashier’s checks: Free. Does not offer certified checks.
Cashier’s checks: $8 for account holders. Does not offer certified checks.
Certified cashier’s check: $3.
Certified checks and cashier’s checks: $2 for amount under $500; free for check over $500.
Cashier’s check: $8; bank says it’s the same as a certified bank check.
Two free cashier’s checks per day; additional checks cost $5 each. Certified checks not listed.
Share withdrawal (bank describes it as a certified bank draft and cashier’s check): No fee.
Cashier’s checks: Free for account holders.
Southwest Airlines Federal Credit Union
Says its cashier’s checks are the same as certified checks; $2.
Cashier’s checks: $8 for clients and $15 for nonclients.
Certified checks: Fees vary by region. Call your local branch.
Official checks: $8.
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.
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SUNIL SETHI REAL ESTATE
Sunil Sethi / Broker, President, REALTOR, Green, MBA, CPA (inactive)
38750 Paseo Padre Pkwy Suite B3 / Fremont, CA 94536
Cell 510 388 2436 / Fax 877 437 9877 sunil@sunilsethi.com
CA DRE#: 01173766
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