What is a Certified Check?

A certified check or ‘cheque’ is a type of check for which the bank confirms that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is being written. Those funds are then set aside in the bank’s account until the check is cashed or in some cases, returned.

A certified check is considered equivalent to cash, since the bank – by its certification – guarantees it to be cashable. No bank has the obligation to the depositors to certify checks since it includes taking up a new duty for which it is primarily responsible. It is a common practice, however, and there might usually be a small fee for this service. A certified check is mostly required by payees who do not want to rely only upon the credit of the withdrawer.

A payee, who does require a withdrawer’s check to be certified, also ensures his right to full payment. Not only can the payee do this, but in the case the bank refuses to pay, the payee has the right to enforce payment from the drawer. In this situation, the bank and withdrawer, both become liabilities.

Occasionally the payee or holder of the check—the person who has been legally given possession and the right to payment—will present the cheque to the withdrawer’s bank for its certification. Although the bank is obligated to cash the check, it need not certify the check because only the bank itself would be liable for its payment. Some banks will certify the check in such situations, but only with the approval of the withdrawer.

If a bank refuses to pay a cheque that has been certified, its drawer or even the holder can sue the bank for its injustice and wrong conduct, also called dishonor.

Because of certified checks becoming the issuing bank’s liability, banks will set the amount on the certified check aside from the holder’s account so that there will always be money available for the check. Although, there are a few downsides to using certified checks. For example, banks will usually charge a fee for certifying checks and that the depositor usually cannot place a stop payment order on a certified check.

On the contrary, why use a certified check if it is equivalent to cash? How is it better? Let’s see:

1. Certified cheques are secure

Certified cheques are obtained at the bank where you have an account. The bank will reserve the funds for the certified cheque in your account, which you can no longer access. This guarantees the certified cheque will not bounce. A certified cheque is as good as cash and can be mailed without having to worry whether it will be lost or stolen.

2. Certified cheques are hassle-free

The primary reason a certified cheque is used in business is when the creditor or the business owner does not know the buyer’s credit. No business wants to accept a personal cheque from a buyer only to hear later that it bounced. The other major advantage of a certified cheque is that, unlike a personal cheque, the sender cannot place a stop payment on it.

No matter what happens, the cheque holder can be rest assured that he/she will be able to cash the cheque without any hassles.

3. Certified cheques are convenient

For people without an account at a specific bank branch, most banks will make you a certified cheque in exchange for cash. That means you don’t have to be at your home branch to do it. There is always a processing fee, which may range from five to 25 dollars. The fee varies depending on your relationship with the bank, how long you have been a customer with the bank, and your past credit history.
Many banks offer discounts to elderly people who want to buy a certified cheque. In rare cases, the bank may neglect this fee.

All in all, Certified checks are a good way for the seller to feel secure about the buyer’s funds because banks issuing certified checks generally set aside and lock the amount of the check to ensure that the depositor does not withdraw the funds, forcing the check to bounce. An original receipt is also required when cashing. If you still have some questions which need answered, you can also go to the local bank, which will provide you with a complete brief.


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