When Do You Need to Use Certified Checks?

Jul 19th, 2018 | 3 comments

Although the world is headed toward electronic banking, there may still be an occasion when you need to complete a paper check or you may be required to provide a certified check. Because not everyone is familiar with the banking services more popular in the past, it is important to have a refresher course on viable ways to pay for things that may be outside of the norm.

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Duncan Smith/Corbis / Flickr source

More trust in certified checks

Certified checks offer a level of assurance that isn’t found with personal checks (those written from you checkbook).

Once the bank issues the certified check to you, the amount of money will be held on your account, meaning you cannot touch the funds. By holding your money, the bank can guarantee the funds will be available to the recipient. You may show a bank balance of $2,000 but the $500 held on the certified check will only permit you to touch $1,500.

And, you physically need to go to the bank and request a certified check. The bank teller will create the check you need that includes the name of the person who will receive the check and the amount of the check. You will also be required to sign the certified checks when it is complete. Some banks charge a fee to issue certified checks.

When certified checks are needed

Certified checks are a good alternative to cash payments when making transactions through the mail. The recipient can cash the check at their own bank and it’s as good as cash because the money is guaranteed.

Certified checks are also used when financial transactions must occur but the recipient does not know or does not trust the check writer. Using a certified check will guarantee the check will not bounce and that the sender cannot issue a stop-payment like they could with a check from their own bank account.

Some common situations where a certified check may be requested include transactions online, making an initial deposit on a rental home, when purchasing a used vehicle with cash from a dealership or a private buyer, or when making a down payment to complete a new mortgage.

What about cashier’s checks?

Some consumers may make the mistake of thinking a certified check and a cashier’s check is the same thing but it’s not true. There are some major differences between these two types of checks and it is important to know the difference especially if you are the one receiving the check.

With certified checks, a bank representative has certified that the amount of the check is available in the issuer’s account. The bank freezes the funds so the accountholder cannot use them before the check is cashed. With a cashier’s check (which also comes with fees), the bank will actually move the amount of cash necessary to cover the check into its own escrow account to ensure the funds are paid out. Banks hold the liability with cashier’s check but not with certified checks. Unfortunately, there are individuals that will counterfeit a certified check so they do present more of a risk than the cashier’s check.

If you are trying to sell something to a buyer you do not know, it is usually best to not accept a personal check. You can request an alternative form of payment including cash, a money order or a cashier’s check depending on your specific needs. While counterfeiting checks and even cash is not uncommon, checks being issued through a bank are typically safer than other methods. If you have real concerns about being ripped off, ask for cash only transactions.

Certified checks may seem to be outdated in an age of digital transactions but they can come in handy under certain circumstances. Your bank may provide certified checks as a complimentary service to certain high-tier checking accounts. Just remember, if you need to obtain a certified check, make sure to have enough funds in your account including for fees before heading to the bank. Also be sure to have the correct name of the payee and the amount due to provide the bank teller who will be creating the check.

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Debbie Dragon

Debbie is a writer who specializes in parental finances, consumer spending and mortgages.

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