Certified Check or Cashier's Check?- An Expert Reveals Which Is Better For You

A frequently asked question in the credit world is: "What is the difference between a certified and a cashier's check?" The differences are subtle. The major differences relate to who signs the check and who is obligated to pay.

Certified Checks
A certified check is the written acceptance for a specific check (essentially an acknowledgment), by the Bank, that the Bank's Customer's signature on that check (1) is genuine and (2) there are sufficient funds in the Customer's account to honor the check when it is properly presented for payment. The check is signed by both the Customer and the Bank.

Under the UCC, both the Bank and its Customer may be liable for the payment. (UCC Sec. 3409 (d)). You would probably be required to seek remedies in a lawsuit against both the Bank and the Customer if there is a problem with the certified check.

A Bank may impose conditions upon its certification (e.g., "Void after 60 days"). If the check has been certified by mistake or obtained by fraud, the Bank may correct its error by canceling the certification and notifying you (the "payee"), if you have not already acted "in reliance" on the certified check.

Such reliance, for example, would arise if you had shipped goods because you relied on the check. One problem with a "certified" check is potential forgery. The Bank is not obligated to pay on a forged certification.

Cashier's Checks
A cashier's check is a draft drawn by a Bank on itself, which the Bank agrees to honor when properly presented for payment. The Bank, not its customer, signs the check. (UCC Sec. 3104(3) (g)). This means that the Bank is liable to pay the check. Theoretically, the Bank has set aside funds from the Customer's account to reimburse itself when the check is presented for payment by the payee. In contrast to the certified check, you could seek remedies immediately and directly against the Bank if there is a problem with the payment of the cashier's check.

If either type of check is lost, destroyed or stolen, the Bank may require a bond or another security before reissuing the check. The Bank also may refuse to honor either type of check if there are material alterations (raising or lowering the amount, changing names or dates). Otherwise the Bank must pay the check when it is presented for payment in its unaltered original form. (UCC Sec. 3412)

Under certain circumstances, for example, the lack of a proper endorsement by the payee, the Bank may refuse to honor either type of check. Although it is not obligated to do so, the Bank may decide to honor a Customer's request for a stop payment on either type of check. However, the Bank does so at its own risk and, particularly for a cashiers check, it may be liable for damages for wrongful dishonor. (UCC Sec. 3411 (b)).

Most Secure: Cashier's Check
The normal follow-up to the frequently asked question about the difference is, "Which is better?" Cashier's checks are replacing certified checks as a favored payment method.

As a practical matter, there are fewer opportunities for forgery and disputes using a cashier's check. Since there may be problems with either kind of check, if you have any misgivings at all about accepting payment via either, you should call the Bank which issued the check to ensure there are no problems or questions that stop the bank from honoring the check.

Alternatively, if your customer has the funds for a cashier's check, the funds should be equally available for a wire transfer. Rather than waiting for either type of check (for which the customer probably will be required to pay a bank fee), you may want to remove the uncertainly by asking for a wire transfer. If the cost of the wire is an issue with your customer, you can always offer to pay, or give credit against future invoices, for the relatively small fee charged for a bank wire transfer.