A certified check is a sign that the funds, in the full amount, were in the account at the time the document was drawn.(1) These funds are then set aside and reserved specifically for allocation to that certified check number.
A cashier’s check takes the transaction one step further by transforming the check into the equivalent of cash. With the latter, a person is basically “buying” from the bank a note in that amount. The amount of the check has already cleared their account, through the purchase transaction, and thus a cashier’s check is generally perceived to be the speedier option from the recipient’s point of view.
The emergency of Paypal.com and Smartphone transactional methods is beginning to chip away at the need for either certified or cashier’s checks. In the case of the former, it is simple and easy for someone to verify that the funds have been transferred.(2)
Within the United States, transferring funds from one Paypal account to another is instantaneous and free. In the case of banks, only preferred customers or holders of certain kinds of account statuses and histories can avoid individual fees for certified and cashier’s checks.
A cashier’s or certified check is only as good as the paper it’s printed on. Though the mechanisms anchoring both, slightly different forms of guaranteed cash-equivalent paper are sound, there are many who try to take advantage of the aura of these golden words.
Craigslist, eBay, and other individual online trading marketplaces are constantly warning their users to be on the lookout for fake cashier’s checks.(3) Despite the aura of these documents, it can take weeks for a recipient’s bank to notify that the document is invalid. By that time, the buyer has absconded with the merchandise.
This antiquated lag time is yet another reason online escrow services and free basic use applications like Paypal are gaining steam. Eventually, it’s possible that at the non-corporate, individual level, these types of guaranteed checks will become a thing of the past.
(1) BankersOnline.com – “What’s the Difference Between a Cashier’s Check and a Certified Check?”, March 4, 2002, Retrieved July 6, 2011 from http://www.bankersonline.com/operations/gurus_op030402n.html
(2) Federal Trade Commission – Giving the Bounce to Counterfeit Check Scams, Retrieved July 6, 2011 from http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre40.shtm
(3) Craigslist – Scams, Retrieved July 6, 2011 from http://www.craigslist.org/about/scams