Certified Checks: How They Work and When to Use Them

What is a certified check? Sometimes called an ‘Official Check’ or ‘Cashier’s Check.’ Could it help you to manage financial transactions with ease? Today, it’s easy enough to move money from one person to the next using electronic means, but there are still numerous benefits to using a certified check. They tend to be one of the most secure and reliable methods of payment, and as a result, they could be one of the best tools you have for managing the transfer of funds.

If you have questions, including how does a certified check work and when you should use them, continue reading. We aim to provide a comprehensive explanation of what they are, how they work, and when to use them.

What is a Certified Check?

A certified check is a written check that is drawn from the bank’s funds rather than the account holder’s bank account. The teller or cashier typically signs it at the bank or credit union. What makes a certified check different is that the financial institution guarantees the funds will be available to the account holders cashing the check.

As a type of payment instrument issued by a bank or credit union, these checks tend to be considered very safe for the recipient to receive as there’s virtually no chance that the funds will not be in the same bank’s account already. They are associated with highly secure transactions.

A certified check is typically used for larger transactions or in situations when you need to provide a guaranteed form of payment for a purchase. This could include instances in which you are buying a valuable asset, like a real estate transaction or a car. They may be used for other types of high-value transactions, including collector’s items, gold, or other valuables.

How Does a Certified Check Work?

The reason most people need a certified check is because the recipient, such as a bank, lender, or asset seller, requested one. How do you get a certified check? Here’s what you can expect from the process. 

• You request a certified check from the financial institution. You typically go into the bank branch or credit union to do this, though some offer certified checks online. Bank employees are trained to issue certified checks, so you will have professional guidance throughout this process.
• You will then need to provide the necessary funds to the issuing institution. If you are a member of that bank or credit union, they may be able to obtain it from your account.
• There is likely a fee to pay for the certified check itself, and this certified check cost can vary from one financial institution to the next.
• The funds you provide from your bank account will be used to issue the certified check made payable to the specific person or entity that you want to receive those funds. That recipient’s name is printed on the certified check. 
• You can then deliver the certified check to the appropriate individual or organization.
• The payee – the recipient – is then able to cash the check or deposit the money into their own bank account.

Benefits of Using Certified Checks

Certified checks are not necessary for many types of transactions. Yet, for larger transactions, you may need to obtain one. There are several key reasons why they can be appealing.

• Increased security: The funds from these checks are drawn directly from the issuing bank. That means there is very little risk of the check not clearing or bouncing, like with personal checks. It also helps ensure that the check isn’t fraudulent.
• Guaranteed funds: There’s also no risk that the money will not be available. That means that the payee will receive the full amount no matter when they cash that check.
• Widely accepted: certified checks are widely accepted. You can use them at most businesses and institutions. That makes them a reliable payment method for many situations.

Also, note that in some cases, you may be required to obtain one. For example, if you are buying a car with cash or putting a down payment on a house, you may be required to obtain a certified check or a money order for the funds rather than writing a check from your personal checking account. It simply gives the payee confidence before letting you leave with a valuable asset.

Certified Check Fees and Considerations

When it comes to obtaining a certified check, you can expect to pay a fee for doing so. How much is a certified check? That’s dependent on the institution itself. The issuing organization sets the fee they will charge for certified checks. Keep in mind that you should be able to request information about the cost upfront – if a financial institution will not disclose the cost before you set up the check, look for other banks and credit unions in your area.

Typically, certified checks are used for larger purchases. Most of the time, there’s no upper limit to the amount you can transfer, though some financial institutions may place one. Again, be sure to verify this information with the bank or credit union before you agree to move forward, especially for very large transactions.

When Should You Use a Certified Check?

You can use a certified check for just about any need. However, they do have a fee, which makes them beneficial in large and very secure transactions primarily.

Real Estate Transactions

They are commonly used in real estate. For example, when placing an earnest money deposit on an offer on a home, you may be asked to obtain a cashier’s or certified check first. This helps the seller to have confidence that the funds are available for the transaction. That’s because, in these situations, having a secure and guaranteed form of payment when buying or selling property is critical.

Large Purchases

Certified checks can also be a valuable investment when making any other large purchase. They provide the seller with confidence that the funds can be counted on. This creates a sense of security and peace of mind when selling something that is of high value. That could include anything from a valuable art collection, a car, a boat, or anything else of high value. In some cases, the seller may require a certified check to be made available before they will allow you to make the transaction.

From the buyer’s perspective, having a certified check for such transactions can help your offer on these large assets be more convincing. That means the seller may choose your offer over others.

Unknown or Untrusted Parties

A certified check can be an excellent tool when you need to accept money from an untrusted or unknown entity for any reason. If you simply do not know the other party, this makes it easier for you to trust in that transaction.

Plus, it’s relatively safe to send certified checks through the postal service, so if you’re completing a transaction via mail you have less to worry about with a certified check as opposed to other forms of payment.

Though it’s rare, fraudulent wire transfers can occur. Personal check fraudulent cases are more common. In these situations, you must trust that the sender has sufficient funds in their account and that these funds are going to be available when you try to draw on them. Certified checks eliminate this risk. These checks eliminate the risk because the financial institution that writes them is guaranteeing the funds will be available.

How to Get Certified Checks From Island Federal

You can learn how to get a certified check by simply contacting your financial institution to request one. At Island Federal Credit Union, we are happy to help you with this process.

Remember the benefits they offer. They are guaranteed funds, which means there’s no risk that the check will bounce. For big purchases, then, they are a must. When you are making a purchase like this, the seller may require you to obtain this type of check to protect them. You can do the same thing. If you want to be sure that someone you are selling your car to, for example, is going to provide the funds, request a certified check from them.

For many reasons, they are a secure and reliable payment option. They can work well for many transactions. We encourage you to give us a call if you need help obtaining a certified check or if you need any guidance on your options for obtaining one.