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A cashier’s check is a guaranteed payment method issued by a bank on behalf of an account holder. It ensures the funds are available and provides added security against fraud or insufficient funds.
If you’re about to spend a significant sum of money—say for a down payment on a new car or your closing costs on your first house—there’s a chance you’ll be required to provide a cashier’s check.
If you’ve never heard of or used a cashier’s check, you may wonder why you can’t just write a check from your personal checking account to handle the transaction. After all, they’ve already approved you for this transaction, so what gives?
In this comprehensive guide, we’ll explore the concept of a cashier’s check, its importance in different situations, how to obtain one, associated costs, alternatives, and much more. Let’s dig in.
In This Piece:
A cashier’s check is a check written by your bank or another bank on your behalf and is guaranteed by the bank. It offers the advantage of guaranteed funds and additional security features, making it a preferred choice for large transactions. Unlike personal checks, you cannot return cashier’s checks for insufficient funds.
How does the cashier’s check work? First, the bank removes the funds from your account or accepts cash or a personal check. The bank then writes a check for the same amount to the recipient of your choice. The bank typically charges a small fee for providing a cashier’s check. These checks also have extra security features, like watermarks, color-shifting ink, and security thread, that make them difficult to counterfeit or commit fraud against and protect personal information.
Cashier’s checks are essential in many situations where guaranteed funds are required. For example, when making a large purchase, such as a car or a house, sellers often prefer cashier’s checks to ensure the payment is valid and secure. Cashier’s checks are also commonly used in real estate transactions, debt settlements, and other scenarios where trust and security are essential.
Cashier checks offer several advantages, including guaranteed funds, increased security, and broader acceptance. They are widely recognized and trusted by institutions. However, there are also some drawbacks to consider, such as associated fees and the need to visit a bank in person to obtain one.
Let’s look at the pros and cons of cashier’s checks.
Pros of Cashier’s Checks:
Cons of Cashier’s Checks:
Considering these pros and cons is essential when deciding whether to use a cashier’s check for a specific transaction. Assess your needs, the transaction’s requirements, and the associated costs to make an informed decision.
Obtaining a cashier’s check is relatively straightforward. Nearly every banking institution offers this service. You can inquire with your bank whether you can request a cashier’s check by phone or if you need to visit your local branch.
Generally, you can purchase a cashier’s check directly from a branch office. Inform the teller of the desired amount, and they will confirm the availability of funds in your account. The check amount may be frozen in your account until it clears or withdrawn immediately.
Typically, obtaining a cashier’s check requires you to physically go to the bank. You’ll also need to show your ID and give them the name of the person or company to whom you want to write a check. Some banks may also require a payee address or phone number, so either call ahead to confirm or have that information on hand before going to the banks.
Follow these steps and tips to get a cashier’s check:
Start by contacting your bank to inquire about their process for obtaining a cashier’s check. You can call their customer service or visit the bank’s website to find out if they offer cashier’s checks and if you need to visit a branch in person.
In most cases, you’ll need to go to your local bank branch to purchase a cashier’s check. Bringing all the necessary documents and information with you is a good idea to make the process smoother.
When you arrive at the bank branch, approach the teller and tell them you need a cashier’s check. Provide them with the recipient’s name and the amount you want the check to be issued.
The teller will verify that you have sufficient funds in your account to cover the amount of the cashier’s check. They may ask you to deposit the necessary funds into your account if you haven’t already done so.
A fee is usually associated with obtaining a cashier’s check, which varies from bank to bank. The teller will inform you of the fee amount and request payment. Be prepared to pay the fee in cash or deduct it from your account.
In some cases, the teller may ask for additional information, such as the purpose of the cashier’s check or any special instructions you have for the recipient. Provide these details as requested.
Once you complete all the necessary steps, the teller will generate the cashier’s check. Double-check the details on the check, including the recipient’s name, the amount, and any additional information.
Keeping the receipt is recommendable. The teller may provide you with a receipt for the transaction. Keeping this receipt for your records is essential, as it serves as proof of purchase and can be helpful if any issues arise.
The specific steps and requirements for obtaining a cashier’s check may vary slightly depending on the bank or financial institution you’re dealing with. It’s always a good idea to check with your bank for their specific process and any additional instructions they may have.
Remember, having all the necessary documents, identification, and funds is crucial to ensure a smooth and hassle-free experience when obtaining a cashier’s check.
The cost of a cashier’s check varies from tens of dollars to a percentage of the check amount, depending on the bank. Typically, banks charge a small fee for providing this service. It is advisable to check with your bank beforehand to understand the exact cost of obtaining a cashier’s check.
Typically, you can’t buy a cashier’s check directly with a credit card. However, suppose you don’t have sufficient funds in your checking or savings account. Then, you can consider taking a cash advance on your credit card, depositing those funds into your bank account, and purchasing a cashier’s check.
Remember that cash advances often come with higher-than-usual interest rates, so promptly paying off the balance is essential to avoid accruing excessive interest.
Cashier’s checks typically do not expire, but the issuing bank may have its policies regarding the validity period. As previously noted, checking with your bank for specific procedures, like how long their cashier’s checks are valid, is always a good idea.
What if you can’t get a cashier’s check? If obtaining a cashier’s check is not feasible for your situation, alternative payment methods are available. Here’s a list of alternative approaches:
Remember, it’s essential to assess the specific requirements of your transaction and consider the level of security and acceptance needed before choosing an alternative to a cashier’s check.
Money orders and certified checks are the alternatives to cashier’s checks with more similarities and popularity. They are constantly compared to each other and often bring confusion due to their resemblances. Let’s look at how they compare so you can make informed decisions in the future.
Money orders have typically limited funds, often up to only a few thousand dollars. On the other hand, cashier’s checks can be written for larger sums, making them suitable for high-value transactions. Additionally, cashier’s checks provide an added layer of security as a specific bank guarantees them.
Certified checks are personal checks the bank has verified, marking them “certified.” Cashier’s checks, on the other hand, are written by the bank on your behalf. Both checks offer a guaranteed level, but cashier’s checks are often preferred for more significant transactions due to their wider acceptance and added security.
If you lose your cashier’s check before it gets to its rightful recipient, the issuing bank could require that you be bonded for the amount of the lost check before they cut another. This bond, known as an indemnity bond, essentially means that you are liable for the replacement check.
In conclusion, cashier’s checks are a reliable and secure payment method for various transactions. Their guaranteed funds and additional security features provide peace of mind to both buyers and sellers. If you need to make a large payment, consider obtaining a cashier’s check from your bank to ensure a smooth and trustworthy transaction.
For more information on how cashier’s checks work or if you need help finding the right credit card to improve your financial well-being, contact experts.
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