Imagine you've decided to sell your car, and after posting an ad online, you've finally found a buyer interested in your vehicle. When you meet the buyer to sell the car, they explain that they don't have the cash on them, but that they can write a personal check from their account to pay you. Eager to sell the car, you accept the check and take it to the bank to cash it. When you do, the teller informs you they can't cash the check- there's not enough money in the buyer's account. Now you've given away the car and don't have the money. What went wrong? 

What's a Cashier's Check?

When you write a personal check from your account, there is no guarantee that there is any money in your account to pay that check, and no one accepting that check can be guaranteed the amount of money that the check promises. To counter this, banks offer cashier's checks. A cashier's check is a check written by the bank, rather than the customer, and comes from a bank-controlled account, not a customer-controlled account. Whoever receives a cashier's check can be reassured there is money in the account. When you purchase the cashier's check, the money comes out of your account immediately, and is placed into the bank-controlled account until the cashier's check is cashed. This prevents anyone from spending or withdrawing the promised cash. 

When Should You Use It?

Cashier's checks are a great option for large-dollar transactions or for when you conduct business with people or companies you don't know well, such as when you buy or sell a car. Occasionally cashier's checks are required in real estate or broker transactions because of the large dollar amounts involved. In transactions such as these, it might be unsafe to carry around large amounts of cash that could be lost or stolen. The benefit of a check is that it can be cashed only by the person to whom it is written, and is less likely than cash to be stolen by someone else because of it.  If your choice is between cash, a personal check, or a cashier's check, the cashier's check is certainly the safest option. 

What to Look Out For

While cashier's checks are a very secure payment option, they aren't foolproof. Cashier's check fraud does exist. Whenever receiving money from someone else, you should be cautious. Many cashier's checks have security features such as heat sensitive dots that make them difficult to replicate. Additionally, your bank may be able to confirm the validity of a cashier's check by calling the bank that wrote the check and verifying  the check number against their records. These days, cashier's checks are part of a larger group of payment options that might get the money to the other person faster or more securely, such as wire transfers, debit cards, or using electronic transfer apps. Always choose the safest and most secure method possible and do your research. 

TL;DR (Too Long, Didn't Read)

Using a cashier's check is safer than carrying cash, and doesn't run the risk that there's no money in the account. If you're doing a large transaction and are deciding to write a check or pay in cash, consider using a cashier's check instead. As always, if you have questions about what option is best for you, ask one of our personal bankers to help find a solution that will work for your situation.