What Is a Certified Check?

A certified check is a type of check for which the issuing bank guarantees that there will be enough cash available in the holder's account when the recipient decides to use the check. A certified check also verifies that the account holder's signature on the check is genuine.

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

Key Takeaways

  • A certified check is a check for which the issuing bank guarantees availability of cash in the holder's account.
  • Banks typically set aside the amount of money listed on the certified check aside in the holder's account.
  • The downsides of using a certified check is that depositors cannot place a stop payment order on a certified check.

Understanding a Certified Check

Because certified checks are a liability of the issuing bank, these banks will typically set the amount of money listed on the certified check aside in the holder's account. This is done to ensure that there will always be money available to honor the check.

There are some downsides to using certified checks. For example, banks will usually charge a fee for certifying checks. In addition, a depositor usually cannot place a stop payment order on a certified check.

Certified Checks and Other Forms of Checks

Checks can be used for several different purposes. While one example is a certified check, a cashier's check is another. A banking institution usually guarantees a cashier's check (specifically, a bank cashier signs the document). This signifies that the bank is responsible for the funds. Large transactions, such as buying a car or house, usually require cashier's checks.

Another example of a check is a payroll check (or paycheck), which an employer commonly issues to compensate an employee for his or her work. In more recent years, physical paychecks have given way to direct deposit systems and other forms of electronic transfer.

Certified Checks and the History of Checks

Prior to certified checks, checks in several forms existed since ancient times. Many people believe a form of check was used among the ancient Romans. While each culture employed its own separate system for checks, they all shared the underlying idea of substituting the check for currency.

In 1717, the Bank of England was the first organization to issue preprinted checks. The oldest American check dates to the 1790s.

Modern checks, as we now know them, became popular in the 20th century. Check usage surged in the 1950s in particular as the check process became automated, as machines were able to sort and clear checks. Check cards, first created in the 1960s, were the precursors to today's debit cards. Credit and debit cards, along with other forms of electronic payment, have since replaced checks as the dominant means of paying for goods. In fact, checks are now relatively uncommon.

Example of Certified Check

Rob has purchased a new home and needs to make an advance payment to finalize the deal. The brokerage agency requests a certified check for the payment. Rob makes out a check in favor of the broker and goes to the local branch of his bank. The officials there check available funds in his account and certify the check for a fee.