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What Is a Cashier’s Check?

A cashier’s check is different from a traditional check in a number of ways.

 

For starters, cashier’s checks eliminate the risk associated with receiving a traditional check because the funds from the cashier’s check are guaranteed by the bank or other financial institution, while a traditional check is dependent on the paying party having enough in their account to cover the full face value of the check.

 

Read on to learn more about how cashier’s checks work, when you need them, and why sellers prefer them.

How they work

Let’s say you move into a new apartment and your landlord requires you pay first and last month’s rent, plus the security deposit, with a cashier’s check. You go to your bank or other financial institution with the full amount you need in your account. After showing valid identification (driver’s license, passport, etc.), you inform the teller how much the check needs to be made out for, who to make it payable to, and any memo to include on the check. When the teller prints the check, the funds are transferred from your account to the bank’s account until the landlord cashes the check. In exchange for this service, the bank charges a small fee, typically around $10.

 

By using a cashier’s check, the landlord is guaranteed to receive the funds because it is backed by the bank, not your account. That eliminates the risk of there not being enough money in your account at the time the check is cashed — which can happen with traditional checks — and thus results in the bank returning the check to the recipient when they try to cash it. (Bouncing a check could lead to overdraft or returned check fees, so it’s important to ensure the funds will be available when using a traditional check.)

When you need one

Cashier’s checks are typically used in high-dollar transactions and transactions between businesses or people who do not know each other. This is because of the virtually risk-free nature of cashier’s checks, but more on that later.

 

They can also be used if a transaction needs to be settled quickly, like a real estate transaction, because cashier’s checks clear quicker than traditional checks.

Potential scams

Legitimate cashier’s checks are guaranteed by the banks and should give the recipient peace of mind that they’ll receive the funds. However, there are a number of scams associated with fraudulent cashier’s checks that trick recipients.

 

One of the more common scams works like this: The scammer inquires a seller about purchasing an item with a phony cashier’s check, but the item costs less than the full value of the fake check. The scammer then asks if they can pay for the item with the phony check, but in return the scammer asks the seller to wire the difference back to the scammer or to a third party. The seller wires the money only to find out that the cashier’s check is a fraud and is left without the money they wired.

 

Exercise caution when receiving a cashier’s check to pick up on these or other suspicious activities.

The bottom line

Cashier’s checks are sellers’ preferred payment method for high-dollar transactions because they are backed by a bank or other financial institution and not reliant on the paying party having enough money in their account at the time the check is cashed.

More information

We are committed to helping you bank better by providing personalized solutions. Our dedicated colleagues can help you find the right product to match your needs. To learn more about cashier’s checks, please call 1-800-360-2472, visit us online, or visit your nearest Citizens Bank Branch.

 

Disclaimer: Views expressed may not necessarily reflect those of Citizens Bank. The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.