A cashier's check is a financial certificate or note that people use in place of cash, regular checks, credit or other types of payment such as money orders. It has other names, including bank check, bank draft, teller’s check, treasurer’s check and official check. Although it functions in much the same way a regular check does, it’s different because the issuing financial institution, not the remitter or buyer of the document, provides the money to cover the face value. This makes it a secure way to exchange money, although instances of fraud are on the rise.
Although each bank has its own take on the design of official checks, the documents always have the name and location of the issuing financial institution, including routing information, clearly displayed. Banks frequently use techniques such as watermarking to improve security, and the documents also are specifically labeled as a teller’s checks.
All official checks include the name of the payee and the amount to be paid, as well as information about the remitter. The notes must include at least one signature or signature facsimile of an official from the issuing bank. The date when the document was issued also appears, which can have an effect on whether or not the recipient can cash it.
In order to get a cashier's check, the buyer withdraws funds from a personal account, or he has cash available. He then pays this money to the institution that creates the certificate, which is often the buyer’s own bank. The bank becomes responsible for paying the amount indicated on the bank draft from that point, so people consider this payment method to be secure or certified.
Some banks are hesitant to issue a cashier’s check if the buyer writes a regular check from a different financial institution to cover the cost. They might not issue the teller’s note because they cannot easily verify that the buyer has enough money in his account to cover the face value. When a person has an account at the bank that issues the certificate, however, this usually isn’t a problem, because representatives easily can access the buyer’s account to see whether enough money is available. Tellers usually still ask to see personal ID before deducting money for a bank draft from a personal account.
International cashier’s checks in major foreign currencies are available at some banks. People use these for tasks such as paying suppliers located overseas or sending money to family and friends. Such checks are secure like the domestic version, but they can take a long time to reach the recipient and finally clear.
In general, regardless of whether a person wants a domestic or international check, a business or individual typically uses one only when the amount to be exchanged is over $1,000 US Dollars (USD). People tend to want a better guarantee of payment the more money is involved, and cashier’s checks provide this. For smaller amounts, money orders sometimes work instead, but they aren’t guaranteed in the same way.
In most cases, bank drafts have fees attached during purchase. The charge can be either a percentage of the total check or a flat fee, but it usually is fairly small. The policies the issuing bank has and the remitter’s relationship to the institution both effect what the person has to pay.
How to Cash
Cashing this type of check is no different than cashing one from a personal or business bank account. The recipient first has to endorse the document on the back. He can then deposit it into his bank account by going to his bank in person or by visiting an ATM. If the recipient wants the money in cash, he has to bring it to a bank teller.
Similar to regular checks, bank drafts expire, typically within 90 to 120 days after they are issued. They usually clear by the next business day, but many financial institutions put holds on checks worth more than $5,000 USD because of an increase in fraud, requiring the recipient to wait up to two weeks for payment. The hold gives the bank time to verify that the document is valid.
Banks usually will issue a cashier’s check to anybody who can present enough cash to cover the processing fee and the face value of the document. This makes them a good choice for people who don’t already have a bank account. Groups and individuals also turn to bank drafts when they want a transaction to be completed fast. The security on these certificate means that the recipient doesn’t have to wait around for verification the way he might with a personal check. This can matter in areas such as real estate, where the ability to get money quickly can make or break a business deal.
Some institutions require a cashier's check as a secure type of payment. Car dealerships might want one for a deposit on a vehicle, for example, or an apartment manager might ask for one when someone is renting a place to live. These organizations usually are dealing with transactions worth at least several hundred dollars at a time, so they want to minimize the risk that a payment won’t go through.
Scams and Fraud
Cases of check scams are on the rise, especially due to an increase in Internet use. One example is when an individual sends an email to another about a check he wants the recipient to deposit. The person who sends the email says that, in exchange, all the recipient has to do is transfer funds to the sender from her own account. The document the recipient gets from the scammer can look very real, but it is worthless.
Another popular scam is used with online sites. A person sends a fake cashier’s check to pay for an item listed for sale, and the seller’s bank initially doesn’t discover the document is counterfeit. By the time the seller knows that the note is fake, he usually has sent the item to the scammer already.
People can avoid fraud by refusing to cash checks from individuals, banks or businesses they don’t know. If they know the issuing bank, they still should verify that the address and other contact information on the check are correct. In general, cashing one of these notes should not require payment from the recipient, except if he takes it to a check cashing service or other institution that explicitly states that it charges a fee.