How Do Cashier’s Checks Work?

How Do Cashier's Checks Work

A cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier. If no name is provided, the amount is paid to the holder of the check.

A cashier’s check can also be understood as a certificate that gives the holder the right to purchase a security on certain conditions. The specific price of the security and the validity period of the check are registered. In essence, this is an addition to the security, drawn up on behalf of the joint stock compa-ny in the name of the holder of the check.

Cashier’s check users

As a rule, banks issue checks to any interested person who is able to pay their face value. The possibility of paying them in cash gives an advantage to those who do not yet have an open bank account. Organizations and individuals apply for bank checks in cases when it is necessary to quickly make any large money transfers. Such cases can arise, for example, in real estate transactions, where a large amount of cash can be inconvenient and sometimes unsafe, and the whole transaction depends on the promptness of payment.

Popularity of bank checks

Bank checks are popular in the USA and Western Europe. In developed countries, in order to ensure the security of payments, organizations sometimes require that large settlements be made precisely with bank checks. A car dealership, for example, may ask for a bank check as a deposit for a car, and a real estate agency may ask for a bank check as an advance payment for acquired property. Due to the fact that the amount of such calculations is quite high, companies resort to using bank checks in an attempt to protect themselves from possible fraud.

Types of cashier’s checks

There are the following types of checks:

  1. Settlement or cross-linked (for transfers from account to account);
  2. Cash (giving the right to cash out at the bank’s cash desk).

Private checks can be:

  1. Nominal (issued to a specific person and used only by those whose name is indicated in the document);
  2. Order (issued to a specific person, but can be cashed by any person);
  3. Bearer (the name is not indicated, anyone can cash the check).

How to fill out a cashier’s check?

It is not enough just to write an order on any paper. A special form is required, which can be obtained from the bank. This form indicates:

  • Passport details of the person who issues the check;
  • Bank details (first of all, account);
  • The amount to be transferred by the bank to the holder of the check, and the time frame;
  • Passport details of the recipient, if necessary.

Be sure to sign. Fill in the check with a ballpoint pen. You cannot edit the information.

How to use cashier’s checks?

Cashier’s checks to securities are used as an additional means of attracting shareholders. They are issued if it is necessary to sell shares or bonds of an open joint-stock company.

Private checks are used as a means of payment between individuals or legal entities. They allow you to simplify the procedure for paying for work without cash. However, they are losing their relevance with the advent of additional services that simplify the work with plastic debit cards and accounts.

How to fill out a cashier’s check correctly?

You should fill out a check carefully. Each form is counted, as is-sued by the bank. You cannot copy or print it for subsequent use. Unused checks are returned to the bank.

You can only use a ballpoint pen (we recommend using one paste, the opposite may raise suspicions). After filling out the check, you must sign and seal it.

You cannot make amendments or cross out anything. This excludes the possibility of cashing out. Before filling out the check, you need to double-check all the data specified in the form. If anything is at odds with reality, the check will be invalid.

How to cash a cashier’s check?

You can only cash out a bank check. Settlement (cross-linked) checks give the right only to transfer funds from account to account. In this case, you have the right to withdraw money from your account.

It is problematic to cash checks if the drawer’s account is in a foreign bank. This can be done through collection. The commission is about 3%, and the whole operation takes about two months. If you are going abroad, it will be easier to cash your check.

You can also open a correspondent account and transfer funds to it. It will take no more than a month, but keep in mind that maintaining the account will be expensive, and you will not save on interest.

Bank check validity period

Try to cash the check as quickly as possible, as its validity is limited. This is usually 10 days from the date of the check. Please note that during this period you must submit a check for payment to the bank. You will receive the money in the period indicated by the financial organization. So, if the drawer keeps an account with an American bank, the money can be received immediately; if it is in a foreign language, the process will be delayed.

You can simplify the process by selling the check to another person. This is possible if you have been issued an order check or bearer check.

Cashier’s check fraud

There are more and more cases of fraud involving cashier’s checks. The development of the Internet served as a rather strong impetus for this. One example is a case of online shopping fraud. The seller is sent a scan of a bank check with a par value of 30% higher than the purchase amount. The buyer asks to urgently send him/her the goods because business is urgent and has no time to wait. For urgency, he/she is ready to pay 30% more, which the seller will receive later when the check is available. The scanned receipt sent by email looks very nice and believable but, in fact, turns out to be a quality fake. When the fact of fraud becomes known, the goods, as a rule, have already been sent to the buyer, and it is very difficult, and sometimes impossible, to cancel the shipment.

Another popular fraudulent scheme is a request for an urgent transfer of cash to a bank account. For example, an old, distant acquaintance calls you and says that he/she urgently needs to make a purchase, but he/she has no cash and his/her bank card is empty. He/she offers you a profitable deal, namely, through e-mail, to send you a photo of his/her bank check with a par value significantly exceeding the required amount, and a promise to send the original check in the shortest possible time. You, in turn, must immediately transfer the funds to his/her bank card, and for the inconvenience caused, you will be rewarded with the difference between the amount sent and received when cashing the check in the bank. In fact, you either never get anything at all, or you get the same fake.

Fraud can be avoided by refusing to accept casher’s checks from people, organizations and banks that you don’t know much or don’t know at all. If they assure that the check is real and has a payment force, then at your very first request, they should not hesitate to confirm and prove that the data and requisites indicated on the check are valid.

Category: Finance

Tags: cashier's check, funding issue, money