Certified check

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A certified check or certified cheque is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is written. Those funds are then set aside in the bank's internal account until the check is cashed or returned by the payee. Thus, a certified check cannot "bounce", and, in this manner, its liquidity is similar to cash, absent failure of the bank. The bank sets aside the funds so that the check will remain good even if other checks are written on the particular account. Like a cashier's check, a certified check guarantees that it is immediately good since it is guaranteed by the bank and the recipient does not have to wait until it "clears."

In some countries, e.g. Germany, it is illegal for a regular bank to certify checks. This regulation is supposed to prevent certified checks from becoming a universal substitute for cash, which is considered the only legal tender. The Deutsche Bundesbank (Federal Bank) is the only financial institution authorized to issue certified checks.

The liquidity and certainty of payment of a certified cheque explains the fact that it is sometimes considered equivalent to cash, such as in the regulation of credit for casino gaming in Macau, where the law explicitly states that if a casino patron obtains casino chips and pays with a certified cheque, the transaction is not regarded as credit for gaming (see Law 5/2004, art. 2).

Banks such as U.S. Bancorp in the United States will still place a hold on certified checks on new accounts for 5 business days. The explanation given is that it is due to fraud and it is for the account holder's protection.

Cashier's Check

A cashier's check (cashier's cheque, bank check, official check, demand draft, teller's check, bank draft or treasurer's check) is a check guaranteed by a bank. They are usually treated as cash since most banks clear them instantly. However, banks are permitted to take back money from a "cleared" check one or two weeks later if subsequent processing finds it to be fraudulent. Because customers believe the checks have been found valid and have been converted to cash in hand, customers are readily defrauded by schemes which ask them to part with goods or a portion of the money if it is cleared in a timely manner.

In the United States, under Article 3 of the Uniform Commercial Code, a cashier's check is effective as a note of the bank. Also, according to Regulation CC (Reg CC) of the Federal Reserve, cashier's checks are recognized as "guaranteed funds" and amounts under $5000 are not subject to deposit holds. The length of a hold varies (2 days to 2 weeks) depending on the bank. It is not clear what length of time may pass before a bank can be held responsible for accepting a bad cashier's check.

Certified Funds

In the United States and Canada, Certified Funds are a form of payment that is guaranteed to clear or settle by the company certifying the funds.

When making certain types of transactions, such as purchasing real property, motor vehicles and other items that require title, the seller usually requires a guarantee that the payment method used will satisfy the obligations. To do this, the seller will require certified funds, usually in the form of:
  • certified bank check
  • cashier's check
  • money order (usually with proper identification)
  • traveler's check (usually with proper identification)
  • EBT wire transfer (ie Western Union)

Specifically, personal checks are not allowed, as the account may not have sufficient funds, and credit cards are not allowed, as the transaction may later be disputed or reversed.

Contributors: forum_admin, sandra
Created by sandra, Aug 19th, 2010 at 06:00 PM
Last edited by forum_admin, Aug 31st, 2010 at 07:18 PM
2 Comments , 5236 Views
Old Sep 17th, 2010, 09:27 PM   #2

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Default Re: Certified check

What about a bank draft? Is that the same thing or something a little different?
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Old Sep 19th, 2010, 08:20 PM   #3

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Default Re: Certified check

Never mind... I see in that post that bank draft is listed along with bank check, certified check etc. Was wondering if those were guaranteed funds if you wish to deposit or cash it in your acct. I assume a bank will still hold it for 7-10 days like they do other checks...
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