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What Is A Certified Check?
A certified check is like any regular personal check in the checkbook verified by the bank to ensure the checkwriter has enough balance in their account to clear the amount mentioned in it. Receiving the verified check is an additional assurance for the payees of getting the payment as soon as they present the issued paycheck at the bank.
When a check is certified, it guarantees its authenticity as the bank where the check comes from verifies the account holder's signature before certifying it. Using such checks for clearance prevents frauds that are loccur during a monetary exchange.
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- A certified check meaning a check where the issuer bank provides a guarantee on behalf of the account holder that they have an adequate amount of cash available in the account to honor the recipient's demand.
- It also verifies the account holder's signature on the check and is considered only when the recipient of the check is not confident about the creditworthiness of the account holder.
- The banks usually charge a fee for issuing these checks, depending on the account, the account holder's relationship tenure, and the transaction amount.
- It helps in the safe execution of larger transactions where cash payment may be highly risky and inconvenient.
How Does A Certified Check Work?
A certified check from bank is the most convenient way of funds exchange between two parties as it helps establish trust at both ends of the transaction. It is the verified mode of payment whereby the bank assures that the payer has a sufficient amount in their account to obey the check that rests with the payee. These checks can be used to serve smaller as well as bigger purposes, be it planning a holiday or purchasing a property.
To understand the certified check definition properly, it is important to know how it is processed. The verified checks are the same as the regular personal checks, but the only difference is in the verification process. When the payer writes the check, the bank undertakes the verification process to certify and stamp it to offer an extra level of assurance, indicating its authenticity.
Once stamped, it means that the bank certifies that the account holder has enough money in their account to clear the amount mentioned in the check issued to the payee. However, the banks may charge a small amount to certify the check.
In the case of large transactions, people use verified checks primarily when they do not know the check writer properly, causing a trust gap. This check bridges the trust gap and proves the creditworthiness of the payer. In addition, it ensures that the funds are secure and provides peace of mind to the recipient.
Given its liquidity, it is always convenient to use a certified check rather than cash to make large payments. Further, it also fulfills the immediate requirement of funds, and the recipient doesn’t need to wait for the check to clear.
Example
Let us consider the following certified check example to understand the concept better.
John Doe purchases a new flat and needs to make an advance payment to close the deal. Hence, the broker requests John to write a certified check for the payment. Thus, John visits his bank’s local branch and writes a check in favor of the brokerage firm. The bank official then checks and confirms the availability of funds in the account and issues this check for a certain certified check cost or fee.
Certified Check vs Cashier’s Check
Banking institutions and credit unions often use certified and cashier’s checks synonymously. However, the two terms are not a substitute for each other and differ hugely in meaning and functions.
Both the terms provide additional assurance to payees about the payers having sufficient balance in their bank account for clearance. However, the source from where the check comes makes all the difference. While a certified check from the bank is written by account holders and verified by banks, a cashier’s check is the one written and issued by the banks on behalf of their customers.
While a cashier’s check is a common option in the banks, a certified one may or may not be an available option with all the banks around. Here is a list of differences between the two types of checks in a tabular form:
| Category | Certified Checks | Cashier’s Checks |
|---|---|---|
| Written by | The account holder or buyer | Banks on behalf of customers |
| Process | A customer writes a check, and the bank verifies and stamps the check once the availability of the required amount is confirmed. | Funds are transferred from the customer’s account to the bank’s account, and the banks write the check to the payees. |
| Risk | Low risk | Even lower than certified ones as the bank itself writes them. |
| Availability | Not all banks | All banking institutions |
Frequently Asked Questions (FAQs)
A verified check can be obtained following a series of steps, which have been listed below:
- Connect with the bank to find out if it offers such checks
- Visit the local branch of the bank
- Give the instructions required for processing the check
- Write the check in front of the banking staff
- Pay the cost as required for every verified check. The certified check cost will differ from bank to bank
- Get the check once the bank professional is convinced
No, these checks cannot be revoked or stopped from clearance, and that's the only drawback associated with such check types.
These checks remain valid for 60 to 90 days. The banks, until this period, ensure that the check writer maintains an adequate fund level to honor the check.
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This is a guide to What is a Certified Check and its meaning. We explain how it works along with an example and differences from the cashier's check. You may learn more about financing from the following articles -
