A cashier’s check is one that is already paid for, similar to a money order. It is often also called a bank check, so cashier’s checks and bank checks are really just two names for the same thing. Cashier’s checks are often preferred to regular personal checks due to increased security. When someone issues a personal check, it is backed by their account, while a cashier’s check is backed by an entire financial institution since the bank bought it from the issuer. This makes it a guaranteed payment.
Cashier’s checks exist because many individuals and businesses alike are wary of accepting regular checks, since the check writer could conceivably clear out his account before the check clears. When a check is issued, there is no guarantee that the funds are in existence, let alone available immediately. Thus, it is a gamble for the party accepting the check, which is why many people only take personal checks from people they trust.
By contrast, a cashier’s check must be paid for in advance. The person wanting to issue such a check needs to go to the bank and pay for it, and then give it to the recipient. Unless the issuing bank collapses the next day, the cashier’s check is guaranteed. In this way, it is as secure as cash, but easier to send in the mail.
There is a price for this security, however. While personal checks only have a one-time ordering fee and cost nothing to issue, cashier’s checks can get expensive to buy. The price is often worth it to most people due to the convenience, but because of the extra cost, some people might prefer to write a regular check from their account for free if possible.
Though this method is considered nearly as safe as cash, cashier’s check fraud does occur. Similarly to creating counterfeit bills or writing bad checks on purpose, some people make money taking advantage of the trust put into cashier’s checks. Such offenders will give others a cashier’s check for more than the amount asked for during a purchase, and simply request cash back from the seller.
In such cases, it turns out that the cashier’s check is either not valid for the amount reported, or not real at all. Unfortunately it can take banks a few days to realize this, and if it’s too late, the check recipient must pay back the bank with money he doesn’t actually have. Such examples of fraud usually take place online.
Due to these distinctions, many sellers request a cashier’s check as the preferred method of payment when dealing with people they don’t know. This works for many general sales. It might be easier to accept a check drawn from a personal account from someone the seller knows, but such trust is not advised online.