What to know about cashier's checks
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At some point, you may need to make a big purchase from a merchant that does not accept credit cards or personal checks. What can you do?

One option is to pay in cash. But carrying large amounts of cash can be a liability and a lot more difficult than carrying a check.

That’s why a common option is to pay with a cashier’s check.

What is a cashier’s check?

With a cashier’s check, or an official bank check, the bank verifies that you have enough money to cover the amount of the check you have requested. That amount is then withdrawn from your account and deposited with the bank, which issues a check to the designated payee in the amount requested.

Merchants accept cashier’s checks because unlike a check from a personal bank account, the cashier’s check is backed by the bank’s funds. That means the risk of the payment bouncing is virtually zero.

“Using a cashier’s check is one of the most secure and useful ways to make a large purchase that cannot be made by a credit or debit card,” says Robert Stammers, director of investor education at CFA Institute.

Advantages and disadvantages of a cashier’s check

Advantages

  •  If a cashier’s check is authentic, it’s drawn on the funds of a bank, and not on a personal or business bank account. So the payee is assured the funds are available, according to the Office of the Comptroller of the Currency (OCC)
  • Settlement is usually faster than with a personal check.
  • Can be cashed only by payee, lowering the risk of theft. Also, a stop payment can be placed if you lose the cashier’s check, according to the OCC.

Disadvantages

  • There is usually a fee. For example, Bank of America charges $15 for a cashier’s check and Wells Fargo charge a $10 fee when issuing a cashier’s check to customers who’ve opened savings or checking accounts, although banks often waive this fee for customers who meet specific account requirements.
  • Forged cashier’s checks are being used more often to defraud people.

When you need a cashier’s check

Some transactions will require a cashier’s check or another similar payment method.

You might need a cashier’s check for a security deposit on an apartment or to cover the down payment on a new car.

When you get a cashier’s check, the bank is basically saying that the funds are good, says Ben Craigie, director of compliance and training at the Massachusetts Bankers Association.

How to get a cashier’s check

You’ll usually have to go into a bank branch to get one. However, many online banks offer official bank checks too. A brick-and-mortar bank may allow you to order a cashier’s check online. But it may cost more to do this.

For instance, Wells Fargo allows its customers to order a cashier’s check in-person or online. But doing this online will cost you an $8 delivery charge in addition to the $10 cashier’s check, according to its website.

Cost of a cashier’s check

Cashier’s checks can range from $0 (if your bank account offers you free cashier’s checks) to around $15. If you’re going to order cashier’s checks on a regular basis, you may want to look for a bank that offers these for free with your account. Online banks such as Ally Bank and Discover Bank offer free official bank checks.

Who uses cashier’s checks?

Consumers most often use cashier’s checks to pay a merchant or vendor that requires cash but will not accept personal checks.

Cashier’s checks also are used in cash trades that must settle quickly, such as with real estate and brokerage transactions.

“Since cashier’s checks are written off the bank’s funds, they settle much faster than personal checks,” Stammers says. In many cases, the funds are available the next day, he says, while personal checks can take days or even longer than a week to clear in some cases.

Security is another big advantage of using a cashier’s check to make a payment.

“It is a great way to carry a large amount of money without the risk of it being stolen,” he says. “The checks can only be cashed by the intended recipient.”

How do I cut a cashier’s check?

In order to cut a cashier’s check: Have cash, or the funds already in your account, and your recipient’s information ready to go. If you are getting a cashier’s check at a branch, you must pay cash upfront in nearly all cases. You also must supply the name of the payee, since banks are not allowed to issue blank cashier’s checks.

You don’t always need to visit a bank branch. Most people get cashier’s checks at bank branches, but some online banks or neobanks offer other options, such as calling or messaging their customer support team.

Watch out for cashier’s check fraud

Fraud is a major concern to be on the lookout for. The OCC has warned that crooks increasingly are turning to cashier’s checks as a way to bilk people out of money and goods.

Some common scams include ordering goods with fraudulent cashier’s check, or sending a phony cashier’s check for goods with an amount above the purchase price and asking the merchant to wire the excess funds to someone else.

In another common scam, a fraudster informs people they have won a prize, such as a foreign lottery, then claims a tax or another fee is due. The scammer says he will cover the tax with a cashier’s check, and asks you to deposit it into your account and send the payment to a third party.

A business or person on the receiving end of cashier’s checks typically bears much of the fraud risk associated with this form of payment. In many cases, by the time the fraudulent nature of the check is discovered, the recipient of the check has lost their money.

Differences between a cashier’s check, certified check and money order

Cashier’s check: An official check you receive from a bank. Money is withdrawn from your bank account and then that amount is printed on the cashier’s check. Usually you’ll need to know the name of the payee so that the bank can print this on the check.

Certified check: When a personal check is certified to be good by a bank. The bank is stating that the person writing the check’s signature is genuine and the person has sufficient funds, according to the OCC.

Money order: A money order is usually limited to $1,000. These can be purchased at a bank, the post office, CVS, Walmart, Western Union, or other locations. Generally, you need to write the payee on the money order yourself.

What happens if you lose a cashier’s check?

If you lose a cashier’s check before you send it, don’t panic: You can get a replacement, but not without some extra work.

The OCC says you will need to get an indemnity bond for the amount of the lost check. Once you have the bond, take it to your bank. The bond ensures that you — and not the bank — are liable for the second check.

Once the bank sees the indemnity bond, it will be assured that it will not be on the hook for two checks.

Unfortunately, getting an indemnity bond can be a hassle. Insurance companies sell these bonds, and it is usually easiest if you go to an insurance broker to help you with the process.

Once you put the process into motion, be patient. It can take 30 to 90 days to get your replacement check, according to the OCC.

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