Loading the player...

What is a 'Cashier's Check'

A cashier's check is a check written by a financial institution on its own funds. A representative of the financial institution then signs it and makes it payable to a third party. A customer who purchases a cashier's check pays for the full face value of the check and usually also pays a small premium for the service. The funds of the issuer - usually a bank - secure these checks, which include the name of a payee (the entity to which the check is payable), and the name of the remitter (the entity paying for the check).

BREAKING DOWN 'Cashier's Check'

An individual can use a cashier's check instead of a personal check to guarantee funds are available for payment. A cashier's check is secured because the individual must first deposit the amount of the check into the issuing institution's own account. The person or entity to whom the check is made out is guaranteed to receive the money when cashing the check.

Difference Between Cashier's Checks and Traditional Checks

The bank does not guarantee traditional checks. If the entity who writes the check does not have ample funds in his account to cover the draft, the bank can return the check. As a result, the payee receives no funds from the bad check. Cashier's checks remove this element of risk.

Difference Between Cashier's Check and Certified Checks

A certified check is a personal check signed by both the account holder and the bank. Cashier's checks differ from certified checks in that the funds owing on a cashier's check come from the issuer's account, while the funds owing on a certified check come from the remitter's account. The bank guarantees a certified check and may put a hold on some of the funds in the remitter's account, but the bank doesn't move the funds from the remitter's account to the bank's own reserves.

Cashier's Checks and Scams

Although cashier's checks are very low-risk, thieves have developed a number of scams centered around them. In one scam, a buyer contacts someone who is selling something and offers to buy it with a phony cashier's check written for a higher amount than the sale price. He asks the seller to wire the difference to another party. The buyer claims he needs to make two transactions but only has one cashier's check, or he makes up another excuse. After the seller wires the money, he realizes the cashier's check is fraudulent when his bank notifies him of this fact days or weeks later.

In another popular scam, the victim receives a letter stating he has been selected to work as a mystery shopper. The letter contains a cashier's check, and it instructs the victim to use part of the check to buy merchandise during the mystery shopping excursions, wire part of the check to a third party and keep the remainder as pay. To be successful, the scam relies on the victim wiring the funds before discovering the cashier's check is a fake.

RELATED TERMS
  1. Check

    A written, dated and signed instrument that contains an unconditional ...
  2. Negative Float

    The period of time between when a bank customer writes a check ...
  3. Canceled Check

    A check that has cleared the depositor's account and has been ...
  4. Float Time

    The amount of time between when an individual writes and submits ...
  5. Check Hold

    Denotes a period of time equal to the maximum number of days ...
  6. Outstanding Check

    An outstanding check is a financial instrument that draws on ...
Related Articles
  1. Managing Wealth

    Top Premium Checking Accounts of 2015

    Which banks offer the best deals for premium checking accounts – and what do you have to do to qualify for one?
  2. Small Business

    How To Do a Background Check on Prospective Employees

    Discover why background checks can be extremely costly, tips for small businesses conducting checks on a budget and if professional checks can be avoided.
  3. Investing

    When Using a Money Order Makes Sense

    Money orders are usually the least expensive way to send "cleared" funds to pay a bill (or traffic ticket). Here's how they work and what to watch out for.
  4. Personal Finance

    Bank Account Tips For Young People

    If you’re just getting started with managing your own bank account, these tips will show you how to do it right.
  5. Tech

    5 Useless Financial Products That Will Disappear Soon

    Bank deposit slip: what's that? Everyday tools of our financial life that went from indispensable to obsolete.
  6. Personal Finance

    The Ins And Outs Of Bank Fees

    These service charges could nickel and dime you right out of your nest egg.
  7. Personal Finance

    How to Write a Check

    Our simple step by step guide for How to Write a Check, for all of you who have never had to pay the old school way.
  8. Personal Finance

    The 8 Best Bank Perks

    Many banks are now offering free perks to entice new customers.
  9. Investing

    The Best Small Business Checking Accounts in 2016

    Accounts with big banks offer frills, such as mobile and text-based banking – but for small businesses, local banks and credit unions can save money.
RELATED FAQS
  1. When do checks expire?

    There is a legal grace period for cashing checks, but depositors and issuers may risk overdraft fees if a late check is presented ... Read Answer >>
  2. How do government-issued stimulus checks affect the economy?

    Stimulus checks are payments given to individuals by the government based on taxes paid in the previous year. The hope is ... Read Answer >>
  3. Are checks escheatable?

    Learn that unpresented checks become unclaimed and escheatable by the state, when the state obtains and holds the title to ... Read Answer >>
  4. What are the differences between preference shares and bonds?

    Learn what information banks keep on file for their customers, and understand how this information can be used to deny an ... Read Answer >>
Trading Center