When making a large transaction (think putting a down payment on a house) or doing business with someone you don't know, a credit card or personal check might not cut it. In those cases, someone might require you to get a cashier's check as a form of payment.
What is a cashier's check and how does it differ from other forms of payment?
What Is a Cashier's Check?
Cashier's checks are usually used for large transactions or when you're conducting business with someone you don't know, because they offer a more secure and speedy payment option.
A cashier's check is taken directly out of a bank's own funds and is signed for by a teller or cashier. Money is taken out of your account and deposited with the bank, which guarantees the check and pretty much insures that the check will not bounce once the recipient of the check tries to deposit or cash it.
A bank will print the name of the recipient and the amount of money you deposited with the bank on the check, and is responsible for paying the recipient directly when they go to collect their money.
Where Do You Get Cashier's Checks?
The only institutions that can issue cashier's checks are banks and credit unions, and most of them offer this option.
Almost anybody can get a cashier's check from a bank or credit union, but some only issue these checks to customers who have accounts opened with the institution. Banks and credit unions are not required to provide cashier's checks to people who are not account holders with them. In these cases, one of your best options would be to open an account.
But if opening a bank account is not a feasible possibility you at the moment, you might need to shop around until you find an institution that will allow non-account holders to get a cashier's check or seek other alternatives at your disposal.
Credit union members can usually get a cashier's check from any credit union that has shared branching with your home credit union, but you will need to bring an I.D. and any info you have on your credit union to get a cashier's check.
Most of the time you will go into a bank or credit union and get the cashier's check from a teller, but some banks, especially online banking institutions, can send a cashier's check through the mail. However, this option takes longer and might not be the best course of action if you need the money sooner. They also might not ship the cashier's check directly to the recipient and will only mail it to your mailing address, so take that into account as well, if timing is a factor.
How Do You Get a Cashier's Check?
Getting a cashier's check does not have to be a difficult process once you know what you need in order to obtain one.
Most banks and credit unions will require certain information before they will create a cashier's check for you, so always check with your institution about the requirements they have in place.
One of the most important elements to securing a cashier's check is to make sure you have enough money in your account or enough cash on you to cover the amount you need. Banks and credit unions will only issue you a cashier's check if you have the available funds to pay for it.
Other information you will need is the name of the recipient of the check, which can be an individual or a business. Banks and credit unions cannot issue blank cashier's checks so its imperative that you have the name of who the check is intended for before you attempt to purchase a cashier's check.
You will also need to bring in identification to obtain a cashier's check. This can come in the form of a driver's license, a government-issued I.D. card or a passport.
Sometimes you might want to put additional info in the memo section of the cashier's check, which could be the reason you're getting the check, or a reference number.
Once you provide this info to the teller or cashier, he or she will create and sign the cashier's check for you. The whole process can take less than 10 minutes, if you have everything ready.
How to Cash a Cashier's Check
Cashing a cashier's check follows the same process as cashing any other check. All you need to do is take the check to your banking institution, endorse it by signing the back of the check and hand it over to the teller.
If you don't have an account with a bank or credit union, there are other options that you can look into to cash a check. Places like check-cashing stores and some business like grocery stores and convenience stores offer the service, but there are usually fees associated with these places.
You could also go to the institution that issued the check to cash it, in some cases.
Pros and Cons of Cashier's Checks
Cashier's checks are one of the most secure forms of payments available, but they are not necessarily flawless options. Always evaluate options to make sure a cashier's check is the right choice for you and know what the risks are that come with them (even thought there aren't many).
Pros of cashier's checks
- Quick: People can access their funds almost instantaneously once the cashier's check is deposited. Banks are typically required to make the first $5,000 available to people in one business day, which is a significantly higher figure than the amount allocated for personal checks. Anything over $5,000 and banks can put a hold on the check to insure the legitimacy of it.
- Guaranteed: The reason cashier's checks are such popular payment instruments is that essentially banks pay recipients with their own funds. This reduces the risk of a check bouncing to almost zero and can offer people peace of mind that they will get the money they are owed.
- Secure: Because cashier's checks already have the name of the recipient printed on them, only the recipient will be able to cash them, which lowers the risk of theft.
Cons of cashier's checks
- Fees: Getting a cashier's check from a bank or credit union is a service that these institutions provide and therefore, you typically have to pay for this service. Fees are usually minimal and can range anywhere from $5 and upward, but it's always good to check with the institution you plan on getting the cashier's check from to see what their policy is because fees vary from place to place.
- Fraud: One of the reasons that make cashier's checks such great options is also one of the reasons people might want to be wary about using or cashing them. The security that cashier's checks provide people are also what make them easy targets for fraudulent activity. There are different scams out there that people can run, but some good rules of thumb to follow are to never accept a check that is older than 90 days and always be cautious if you receive a check that is more than the amount you expected. If you deposit a check, withdraw the money and the check comes back as a fraud, you're on the hook to pay your bank back that money.
Cashier's Check vs. Alternatives
Cashier's check offer people a secure form of payment, but there are other options that you might want to use instead.
Certified checks can be considered almost like a cousin to cashier's checks — the differences between the two are minimal — but unlike cashier's checks where the money is drawn from the bank's funds, certified checks are drawn from your own personal account. Both you and a bank teller sign the check, meaning you both share the liability if something were to happen to it. Banks still ensure recipients that you have the money in your account to cover the cost of the check and can freeze the amount needed.
A money order can be especially helpful when you need to mail a payment to another person. Money orders do not necessarily require the use of a bank and can be filled out at various locations, including Walmart or a post office. You fill out a form that specifies who should be receiving the payment and both you and the recipient must sign for it. Money orders are a type of prepaid payment that usually has a cap on how much you can send to someone.
Wire transfers are another option for an expedient and safe transaction. They are an electronic transfer of money and allow recipients to access the money instantaneously because there are no holds on the money. They are also one of the best options if you want to send money overseas. Wire transfers are usually more expensive to send than cashier's checks so that is one trade-off associated with this payment option.
What Happens if You Lose a Cashier's Check?
Unlike a credit card or personal check, cashier's checks usually cannot be canceled if you lose them, and trying to get your money back or to get a new check can be a lengthy process.
In the unfortunate case that a cashier's check is misplaced, the institution that issued you the check might require you to get an indemnity bond in the amount of the check that was lost. An indemnity bond acts like a form of insurance and covers the loss you might incur. A bank usually requires you to get an indemnity bond before signing another cashier's check because it makes you liable for the second check instead of the bank. The Office of the Comptroller warns that getting an indemnity bond can be difficult and advises people to reach out to an insurance broker for assistance.
Even when you present an indemnity bond to a bank, it might make you wait anywhere from 30 to 90 days before issuing you a replacement cashier's check.
If you lose a cashier's check that someone gave to you, you can ask the person to buy another check, but if they decline to, it's up to you to approach the bank with an indemnity bond to get a replacement check.