Cashiers Checks, Certified Funds and Money Orders

There may be some occasions when a consumer may need more than just a personal check. In most cases, this will arise from the need to deliver a payment process with a guarantee. A common payment method needed with guaranteed funds would be the down payment for a home.

Cashier’s Check

What makes the cashier’s check unique is that funds are not drawn from your personal account. A cashier’s check is a check issued by a bank on its own account. The customer provides the money to the bank for the amount to be paid by the bank but the funds for the check are drawn on the banks account. In order to get a cashier’s check, you withdraw funds from your personal account, or you have cash available. The customer who purchases the check will be the remitter, and the bank will fill the named payee requested by the party purchasing the check. The bank authorized employee signs the check and not the purchaser. Funds from the check are then drawn on the bank, and not on your personal account. The check is received as cash since it is guaranteed by the bank and does not depend on the account of a private individual or business. Cashiers’ checks are commonly used when payment must be credited immediately upon receipt for business, real estate transfers, tax payments and the like. If you lose a cashier’s check, the bank will require that you obtain an indemnity bond for the amount of the lost check before it will issue you a new one. This ensures that you—not the bank—will be liable for the second check. Otherwise, the bank could be liable for both checks.

Certified Check

A certified check is a check issued by a bank, which certifies that the originator of the check has enough money in his/her bank account to cover the amount to be paid. The bank sets aside the funds from the customer’s account the certified check is written from so that the check will remain good even if other checks are written on the particular account. The main advantage of issuing a certified check for payment is that the instrument comes with a full bank guarantee of being honored. Like a cashier’s check, a certified check guarantees that it is immediately good since the bank guarantees it and the recipient does not have to wait until it the funds become available or the check clears. This means that there is no possibility of the check being declined or returned, as the funds to back the certified check are collected at the point of issue.

Money Orders

A money order is generally considered a substitute for a check with one measurable difference. A money order is an instrument that orders a sum of money to be paid to someone else. Because the money order must be paid for in full at the time of purchase, the payee is guaranteed the money will be paid to him. The money order is paid in advance with the purchaser’s funds and used just like a check. With a money order, you will not receive the money order after it is cashed.

Wire Transfers

A wire transfer is a way to instantaneously send money electronically from one account to another. A wire transfer can be made from one person’s bank account to another bank account, and a wire transfer can be processed with cash without the need of a bank account thorugh services such as Western Union.

A wire transfer is actually very similar to direct deposit and other forms of electronic funds transfers or EFTs. Wire transfers are often used for transfers of large sums of money exchanged between financial institutions. Wire transfers are also used for handling electronic payments between countries.

Within the U.S. bank-to-bank transfers are conducted through the Fedwire system, which uses the Federal Reserve System and its assignment of routing transit number, which uniquely identify each bank. For international wire transfers, banks in the United States use SWIFT to make payments to banks in other countries. SWIFT is a co-operative society, founded in 1974 by seven international banks, which operates a global network to facilitate the transfer of financial messages. Using these messages, banks can exchange data for funds transfer between financial institutions.

There are fees for most all of these services. Costs will vary depending upon the financial institution and may even be waived when using your own bank for the service. International institution and international transactions may be considerably more expensive than local service and use. While the service can be a tremendous convenience, the costs can add up fast and should only be used if the form of payment is necessary or required.

This entry was posted on Sunday, October 12th, 2008 at 11:36 am and is filed under Banking and CD Guide. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.