Banks guarantee payment of a cashier’s check because it is issued from their own and not the depositor’s account. The account holder makes cash payment in advance for the amount of the cashier's check, and sometimes a fee for the actual check, and the bank produces the check, which is signed by the cashier. Most vendors will accept the check as if it were a cash payment.
Using a Cashier's Check
Typically, merchants or service providers, such as utility companies, ask for payment with a cashier's check to increase the level of certainty that the funds will be good. This may also be required if you have written a check that was dishonored in the past. Also, a seller may require this form of payment if you're purchasing a high-dollar item, such as a used car. The seller does not want to risk the possibility of a personal check bouncing or does not want to handle thousands of dollars in cash at the point of sale.
Same as Cash
Because the cashier’s check acts as cash, the bank will require cash or a direct withdrawal or debit from your account before it will issue the check signed by a cashier or bank officer. You can use a credit card, but to do so, you have to take a cash advance as a separate transaction, then give the cash to the bank cashier for the cashier’s check. There is a fee associated with the cash advance and the purchase of the cashier’s check.
A certified check is similar to a cashier’s check, but the funds are drawn from the account holder's account, not the bank's account. The bank certifies, or confirms, that the funds are available in the account and only makes the money available for the certified check transaction. So the account holder can't use the funds for any other purpose. It's as if the money already has been withdrawn.
Using Your Own Bank
If you have a checking or savings account, it's best to get the cashier’s check from your bank. You will typically get better rates as an account holder or even receive the cashier’s check for no additional charge. Fees for cashier’s checks usually range from $5 to $10, depending on the bank you use.
Chris Brantley began writing professionally for a financial analysis firm in 1997. From 2000 to 2004, he worked as a financial advisor, specializing in retirement planning and earned his Series 7, Series 66 and insurance licenses. Brantley started his full-time writing career in 2012 and has written for a variety of financial websites, including insurance, real estate, loan and investment sites. He holds a Bachelor of Arts in English from the University of Georgia.