What Is a Bank Check Called? Official Types Explained
Clarify the types of official bank checks, their guaranteed nature, and practical applications for secure financial transactions.
When a significant payment is necessary, cash can be impractical and personal checks may not offer enough assurance. This article clarifies the various forms of official bank checks and their role as dependable payment solutions.
Understanding Official Bank Checks
Official bank checks are payment instruments backed by a financial institution, providing a higher level of security than personal checks. A cashier’s check is drawn on the bank’s own funds. When a cashier’s check is issued, the money is typically moved from the customer’s account to the bank’s account, and the bank guarantees the payment.
A certified check is a personal check where the bank verifies and guarantees the availability of funds. The bank earmarks the specific amount from the customer’s account, ensuring those funds cannot be spent for other purposes. While the funds are guaranteed, the check is still drawn on the customer’s account, unlike a cashier’s check which is drawn on the bank’s funds. Money orders are another prepaid payment instrument, generally used for smaller amounts. These are often available at banks, post offices, or retail stores and are prepaid, ensuring the funds are available.
How Official Bank Checks Differ from Personal Checks
Official bank checks provide a higher level of security compared to standard personal checks. A personal check is drawn directly from an individual’s checking account, and its payment depends on whether sufficient funds are present when the check is presented. This means there is a risk of a personal check bouncing if the account holder does not have enough money.
In contrast, official bank checks offer a guarantee of funds, significantly reducing the risk of non-payment. Cashier’s checks are drawn on the bank’s own funds, while certified checks involve the bank setting aside or “earmarking” the funds from the customer’s account. This guarantee makes official checks a preferred choice for transactions where the recipient requires assurance of payment.
When and Why Official Bank Checks are Used
Official bank checks are frequently required or preferred in situations demanding assured payment. High-value transactions, such as purchasing a car or making a down payment on real estate, often necessitate these checks. Sellers in these scenarios seek guaranteed funds to mitigate the risk of a bounced check.
They are also commonly used for rental security deposits or the first month’s rent, providing landlords with payment certainty. Payments for official fees, including government services or court-related costs, often specify the use of a cashier’s or certified check. When dealing with parties with whom there is no established trust, such as online marketplace transactions, an official bank check offers a secure payment solution. This ensures both the payer and payee have confidence in the transaction’s completion.
Obtaining an Official Bank Check
To obtain an official bank check, individuals typically visit their bank or credit union. Most financial institutions offer cashier’s checks and certified checks to their account holders. Some banks may issue cashier’s checks to non-customers, though often for a higher fee.
When requesting the check, you will need to provide the exact amount, the full legal name of the payee, and sometimes the purpose of the check. The funds for the check, plus any applicable fees, must be available in your account or paid in cash. Banks typically charge a fee for issuing these checks, generally ranging from $5 to $20, depending on the bank and the type of check. It is advisable to keep the receipt provided by the bank for your records after the check is issued.