What is a Certified Check
A certified check is a guaranteed check prepared by bank’s cashier in the name of the payee to make payments which are not possible in cash. Once the check is made, amount from the account is set aside leaving no scope for bouncing of the check. It is an assured payment made by the businessman to its suppliers or vendors. Both the bank and the issuer are liable for the payment of this check. Hence, both are at a risk of facing the lawsuit if the payment is troubled due to any reason.
This is mostly used in making payments for cars and houses or for buying high value products whose cash payment may pose a hassle to both the parties. It is also suitable for making those payments where it is not possible to meet the seller physically as in the case of check being shipped.
Forgery poses biggest problem in accepting these checks. Bank has full right to deny payment to a forged check. That is why extra care should be taken while receiving certified checks. Cashier’s check is supposed to be the better option than the certified check because former cannot be forged easily. Since issuer is the bank in case of cashier’s check, it holds more weightage in terms of safety and surety.
Banks charge a processing fee for certified checks. This fee varies from bank to bank. Stop payment cannot be marked on a certified check. Money is set aside in account holder’s account by the bank by marking hold on the amount printed on certified check. If you issue a certified check of $500 and funds lying are $1000 then you have access to $500 only though your checking account may show $1000 as available balance.
Certified checks are used as payment mode when the seller is not sure about the creditworthiness of the party. Since certified check is a sort of guarantee taken by the issuing bank about the availability of funds and the genuineness of signature, this is a bit safer mode of receiving payment. This is one of the better ways of dealing with parties with lesser known backgrounds.
Certified check can be made by banks in lieu of cash if the maker of the check does not hold an account in the bank. Some banks offer making of certified checks for free to their valued customers. Certified checks are used when the guaranteed payment is must. Use of certified check is preferred over cash and paying via credit is another costly option where the buyer lands up paying interest charges in case repayment is not made on time to the bank. Credit facility also requires contacting the bank directly which is a far more time consuming task than simply issuing a certified check.