Cashier’s checks are checks issued by banks, and they're used when somebody wants to be sure that they'll really get paid. Personal checks (and business checks) are less secure forms of payment – if you're the person getting paid – because you can never be sure if a check will bounce.
If you're paying with a cashier's check, funds move out of your account immediately when you request the check. The money goes into the bank's account, and whoever you're paying will feel more confident; they know the bank has already taken the money and set it aside for them.
How to Get Cashier’s Checks
To get a cashier's check, visit a bank or credit union – preferably one that you currently use for banking (wherever you have your checking account is fine). Be sure to bring ID, and bring cash if you don't already have the necessary funds in your account. Ask for a cashier's check, and provide any information the teller needs. Typically they'll want to know:
- The amount of the check
- Who the check should be payable to
- Any "memo" or notes that you'd like to include on the check
Once the check is issued, funds will be taken from your account (or the bank will issue the check based on any cash you bring). You may also have to pay a fee to get the check issued.
What if you don't have a bank account? You can walk into any bank or credit union and ask for a cashier's check. However, some institutions will only issue checks for customers, so you might have to try several different times (or open an account). You could also try a money order instead.
Money Orders vs. Cashier's Checks
Money orders are similar to cashier's checks. They are considered "safe" forms of payment because they can only be purchased with cash, so there's no wondering whether or not a check will bounce. But money orders are not issued by banks. Instead, they're available from post offices, retail stores, and money transfer businesses. Money orders also come with dollar limits, so they might not be useful for large items like home purchases. For more details, read about the differences between money orders and cashier's checks.
When are Cashier’s Checks Used?
Because of their relative safety, cashier’s checks are typically used for high-dollar transactions and transactions between people (or businesses) that don't know each other. Instead of hoping that your buyer has funds available in their checking account, you can be sure that a bank has enough cash on hand to pay what you need (assuming the check is legitimate, see more on that below).
Cashier’s checks are also used in transactions where the money needs to settle quickly. When you deposit a check, you might see the money in your account, but you can't withdraw all of that money until the bank "clears" the deposit (with personal checks that might take several weeks, but with cashier's checks and government-issued checks the funds are typically available immediately). In a real estate transaction, nobody wants to wait for processing on a personal check – again it’s a significant asset being sold. Likewise, brokerage firms may require settled funds for certain transactions, and cashier’s checks can be used there also.
The Safety of Cashier’s Checks
If you're getting paid with a cashier's check, you may wonder how safe they really are. Traditionally these checks have been among the safest checks to accept because the promise to pay is made by the bank issuing the check – not the person who hands you the check. They are sometimes called bank drafts.
To dig deeper, compare a cashier’s check with a personal check. When you write a personal check, you’re supposed to have enough money in your account to cover the check. However, you may know that your check will be in the mail for a few days, that it will take the recipient a day or two to deposit the check, and that processing the deposit will take another few days. Therefore, your account won’t be debited for several business days after you write the check. If you don’t have the funds available today, you can always hope that they’ll be there when it really matters: when the check is presented to your bank for payment. So, you can write the check anyway, and you can probably walk away with merchandise in your hands. This practice is called floating checks (and it is illegal).
Unlike personal checks, cashier’s checks pull from your account when they are issued. This means, of course, that you can’t get a cashier’s check unless you actually have sufficient funds in the account or you bring cash to the bank. Once the check is issued, the bank is responsible for paying the payee.
As a merchant, which would you rather get – a cashier’s check or a personal check? Of course, your odds of being paid are better with a legitimate cashier’s check.
Cashier's Check Scams
Unfortunately, not all cashier's checks are legitimate. They are regularly used in scams because sellers assume they're 100% safe. A typical scam involves somebody sending you a cashier's check and asking you to do something with that money (if they want you to do anything besides keep it, watch out). Unfortunately, your bank will let you do this, you'll send money to a thief, and you'll have no recourse except to go after the thief. For full details, read How Cashier’s Check Fraud Works.