Banking Basics: Understanding the Cashier’s Check

Budgets & Banking, Planning & Saving
on February 22, 2013

In this age of electronic payments and money transfers, cashier’s checks are not as popular as they once were. However, cashier’s checks are still commonly used to complete some financial transactions. A cashier’s check is a check that is issued by a bank or other financial institution at the request of a bank customer. These checks are used in situations when a personal check is not considered a viable option by either the person writing the check or the person receiving the check.

A person who needs a cashier’s check will request the check from his or her bank. The bank will then withdraw the money for the check from the customer’s account. Banks generally also charge a small fee for issuing a cashier’s check. After collecting funds to cover the check, the bank will then issue the cashier’s check to the customer. The bank typically prints on the check the name of the party being paid as well as the name of the person who requested the check. The customer then delivers the check to the party being paid. When the cashier’s check is cashed, the money paid out comes directly from the bank’s account instead of the customer’s account.

Cashier’s checks are considered safer than personal checks as the bank guarantees the funds for the check and cashier’s checks generally have more security features that a personal check to reduce the chances that the check can be counterfeited.

There are a number of situations when a person may want to receive or to issue a cashier’s check. A person may want use a cashier’s check to pay a bill to a creditor that he or she does not trust without exposing his or her personal banking information. An example of this is a person paying a company collecting on an old debt. A time that a person may want to receive a cashier’s check is when selling an expensive item to an unknown buyer. For example, instead of taking a personal check from a buyer for a used car, the seller may request that the buyer provide a cashier’s check for the purchase. Cashier’s checks also clear more quickly than a personal check, this is important for some time restricted payments such as real estate transactions and investment account funding.

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