What is a Banker's Check?
Personal Check vs Banker's Check
To understand what a banker’s check, also called a “cashier’s check” is, we first need to understand what a personal check is.
Personal Check Definition
A personal check represents an instruction to transfer a sum of money from the drawer’s account to the payee’s account.
When the payee deposits the check into their account, the check is verified as genuine, and the transfer is performed.
An individual with a checking account has the authority to draw checks against the money housed in their account.
It’s impossible to predict when a check will be deposited after it is drawn.
The funds represented by a check are not transferred until the check is deposited and cleared, so it is possible that the drawer’s account may not have enough money in their account to fulfill the transfer when the check is deposited.
When this happens, a check “bounces” and the payee receives zero money.
For this reason, checks are seen as less secure than cash.
Banker's Check Definition
A banker’s check offers the security that a personal check lacks.
A banker’s check is a check that is drawn from the bank’s own funds and signed by a cashier.
The bank guarantees that the check will be cashable, so the person receiving the check knows with certainty that it will not bounce.
Purpose of Banker's Checks
Banker’s checks are typically used to cover larger purchases, such as cars or houses—that way, the person selling the car or house does not have to rely on the credit and good faith of the buyer.
While difficult to duplicate, banker’s checks are notorious for the many scams
How to Get a Banker's Check
Here is what you need to know if you are getting a banker’s check:
- Banker’s checks are available from most banks and credit unions. Visit your local bank and request the check from the teller, and then pay the check amount and any applicable fees. Most banks require a small fee for this service.
- Personal identification, exact amount of purchase, and names of the payor and payee are needed.
- Remember to get a receipt for your transaction, this is your proof of purchase and can help you track the check.
- Since banks and credit unions are the only institutions who can issue these types of checks, you may need to open a checking account (if you don’t already have one) in order to use a banker’s check.