You're about to make a big purchase -- your first house or a car -- and even though you saved enough money for a down payment, the seller requires a cashier's check. If you've haven't ever purchased a cashier's check, you may be wondering why a personal check isn't OK, and what kind of fees you will have to pay. Here's how cashier's checks are used and how you can get one when you need it.
What are cashier's checks?
A cashier's check is a draft guaranteed by a bank, drawn from the bank's own funds and signed by a cashier or teller. It's used in place of cash, personal checks, credit, or money orders. The most important difference between a regular check and a cashier's check is that the financial institution that issues the check covers the face value instead of the purchaser. Sellers ask for this kind of payment because it's guaranteed, since the funds are drawn against the bank rather than against your personal account.
How can you get a cashier's check?
Cashiers ensure that the purchaser has cleared funds in his or her account before issuing a cashier's check. If you're using a bank where you have an account, make sure you have sufficient funds in your account to cover the amount of the check and any fees. The full amount of the check will be frozen in your account when the check is issued.
If you're traveling, or in a pinch, and you can't find a bank that will issue you a cashier's check for cash, you may need to open an account. To compare the cost and possible fees with free or low-fee checking accounts, try our checking tool.
Drive-through banking is convenient, but you'll need to talk face to face with a teller to get a cashier's check. To purchase your check, you will have to show identification, supply the exact amount of the check, and provide the name of the payee. You cannot get a blank cashier's check; you must furnish the name of the payee when you purchase the check. Once the teller confirms you have the funds to cover the amount on the check, the teller will draft the check for the amount you requested, sign it, and then give the check to you.
Fees and bank policies
Most banks charge a fee for the purchase of a cashier's check. The charge can be a percentage of the total amount of the check or a flat fee. Several banks also offer free cashier's checks. You can find information about cashier's check fees and other related policies by searching the checking section on the bank's website.
Cashier's checks contain additional security features that make it more difficult to counterfeit payments, and this also helps consumers avoid cashier's check fraud.
If a cashier's check is lost, banks require the purchaser to get an indemnity bond for the amount of the lost check before issuing a new one, according to the Office of the Comptroller of the Currency. This bond ensures that the purchaser is liable for the replacement check.
Cashier's check vs. certified check vs. money order
A cashier's check isn't the same as a certified check, which is a personal check written by a bank customer and drawn on the customer's account. The bank certifies that the signature is genuine and that the customer has sufficient funds to cover the check.
Why use a cashier's check instead of a money order? Money orders are inexpensive, and you can purchase them with cash or a debit card, but postal money orders are not issued for amounts over $1,000. However, money orders aren't considered guaranteed funds, since they aren't covered by another institution. Cashier's checks are one of the safest, most practical, and increasingly preferred ways to make large payments on purchases.