CERTIFIED CHECK: FEATURES, BENEFITS AND EXAMPLE - ECONOMY - 2025

A certified check is a type of check by means of which the issuing bank verifies that there are sufficient funds in the account to cover the amount of the check, and thus certifies it at the time the check is written.

Those funds are held in the bank's internal account until the beneficiary cashes or deposits the check. This type of check also verifies that the account holder's signature on the check is genuine.

Source: pxhere.com

Therefore, this type of check cannot be stopped (it cannot "bounce"). In this way, its liquidity is similar to cash, unless there is a bank failure or an illegal act, such as the funds being based on a fraudulent loan, in which case the check will be rejected.

Situations that require certified checks often include those where the recipient is unsure of the creditworthiness of the account holder and / or does not want the check to bounce.

characteristics

A certified check is a personal check issued by the holder of a bank account, drawn on the account, and guaranteed by the bank.

After verifying that a check is good, the bank usually adds a stamp and signature to the check, as well as conditions, such as that the check expires after 60 days. The bank must then prevent the writer of the check from withdrawing or using the funds that have been reserved for this check.

With a personal check, you have no idea if the check writer has enough money in the bank to cover the payment.

Even if there was money there at some point, it could be spent before the check is deposited or cashed, meaning that it may not be paid and the fee for depositing a bad check may have to be paid.

Because certified checks are the responsibility of the issuing bank, it will generally save the amount of money on the certified check in the holder's account. This is to ensure that money is always available to pay the check.

Drawbacks

There are some drawbacks to using certified checks. For example, banks generally charge a fee to certify the check.

Also, a depositor generally cannot place a stop payment order on a certified check.

Advantage

In some financial transactions, especially larger ones, paying with cash can be impractical for buyers, and accepting payment with a regular personal check can be risky for sellers, especially if there are concerns about a buyer's ability to pay.

A certified check can dramatically reduce the risks for everyone in such a transaction. The main purpose of a certified check is to ensure that for the person receiving the payment, there is money behind the check.

The recipient of the check is looking for some guarantee of receiving payment: For example, if the recipient is selling their car and gives it to the buyer, by delivering a personal check, that check may be uncollectible and they will not be able to get the car back.

Because their face value is guaranteed, legitimate certified checks are only as good as cash. They can help provide reassurance when products or services are exchanged in a large transaction.

Differences with cashier's check

The biggest difference between the two lies in where the money comes from. With a certified check, the money is withdrawn directly from a personal checking account. The name and account number of the holder appear on the check.

A certified check will also have the words "certified" or "accepted" printed somewhere on the check. In addition, it is signed by the bank. The cashier's check is drawn against the bank's funds, not against money in a checking account.

The cashier's check is purchased using funds from the checking or savings account, and the bank transfers the money to the buyer's account. The cashier's check is issued with the bank's name and account information.

It's a subtle difference, but it's important to consider if a payment needs to be made and the payee requests a certified check instead of a cashier's check, or vice versa. It is also important to understand where the funds are coming from if one of these checks is received.

Security

Both cashier's checks and certified checks have relatively low risk if the check in question is genuine.

However, between the two, a cashier's check is considered a safer bet. This is because the funds are withdrawn against the bank account, not an individual person or a company.

Weighing the security of one type of official check over the other is important if you are concerned that you are a potential target of a fraudulent check.

Example

Certified checks are often used for large transactions, generally for the following:

- The purchase of a house or vehicle, where a title exchange is required.

- Payment for the rent of a house or apartment, especially if a previous check has bounced.

- Payment for the purchase of a business, where again it is likely to be a large sum of money.

Source: flickr.com

How to get a certified check

To pay with a certified check, you visit a bank branch, where a bank employee can verify that the person is the owner of the account and that they have funds available in their account. Ask what the requirements are before writing the check.

In many cases, the check will simply be written as it would normally be, and the bank staff will add the certification.

How to protect yourself against possible fraud

It is the recipient's responsibility to ensure that the check they receive is legitimate and has not been forged.

Bank security experts warn that it is difficult to recognize a fake. They recommend that the bank be called immediately after receiving the check, to verify that it is legitimate.

However, the phone number printed on the check should not be called. It could also be false. Look up the bank's phone number on the Internet, call, and then give the bank the check number and buyer's name.

The safest bet may be to ask the buyer to get the check from a local bank branch and go with the person when they issue it.

Certified and Cashier's Check Fees

Fees can be $ 15 or more, depending on the amount of the check. However, some financial institutions offer reduced fees or no fees for account holders.

References

1. Wikipedia, the free encyclopedia (2018). Certified check. Taken from: en.wikipedia.org.
2. Juan Castillo (2018). What is a Certified Check? Nerdwallet. Taken from: nerdwallet.com.
3. Rebecca Lake (2018). Certified Check vs. Cashier's Check: Which Is Safer. Investopedia. Taken from: investopedia.com.
4. Investopedia (2018). Certified Check. Taken from: investopedia.com.
5. Justin Pritchard (2018). What is a Certified Check? The Balance. Taken from: thebalance.com.