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What Is a Certified Check?

written by: Kantha Wijeratne•edited by: Stephanie Mojica•updated: 2/11/2010

A certified check represents a guaranteed payment. It is a safe way to ensure payment in a transaction when a payer’s creditworthiness is not known to the buyer or payee. Read this article to learn more about certified checks.

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    There are some transactions that require you to make payment with a certified check. For example, an initial down-payment for a home purchase or deposit to an escrow account would usually be by way of a certified check. It is a safe way to ensure payment when the parties to a transaction do not know each other. A certified check is advantageous over a normal check as it carries a guarantee of payment. How is this possible?

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    How Does a Normal Check Payment Work?

    In your day to day transactions you may choose to pay for an item or service by writing a check. You are then authorizing your bank to transfer funds from your account to that of the seller or payee. Your bank will honor your check if there are sufficient funds in your account to cover this payment. If you deposit a check received from another in to your account, your account will be credited for the amount of the check if there are funds in the payer’s account to cover this payment.

    A check will “bounce" or be returned to the payee, if there are insufficient funds in the payer’s account or if the payer instructs his bank to stop the payment from going through. Dealing with a returned check is unpleasant, time-consuming and can entail fees and affect your account standing with the bank. In short, check transactions are safe when you trust the person or company issuing the check. This is not always the case.

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    How Does a Certified Check Guarantee Payment?

    It is in these situations that a certified check comes in handy. You write the check to the payee in the usual way and then request your bank to certify it. When certifying your check, the bank verifies two things. It ascertains that the signatures of the check writer or writers are genuine. The bank also makes sure there are enough funds in your account to cover this payment. The bank will either debit your account right away for this amount or reserve these funds to meet this payment. The bank will then “certify" the check by having an authorized officer stamp and sign it. A fee is charged for providing this guarantee.

    If you do not have an account with the bank, you can request the bank to provide you with a cashier’s check. In this instance, you pay for the amount of the check and processing fee in cash. The bank issues a check from its own account signed by the cashier or other officer authorized to do so. Money orders and drafts also work in a similar way and can be obtained from a bank or a post office for a fee.

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    What Can Go Wrong With a Certified Check?

    Any issues relating to a certified check can arise if the signatures are forged, the amount of the check is fraudulently altered after issue or if it carries a forged or incorrect endorsement. If a certified check is lost or misplaced, you should inform your bank immediately. Before the bank issues a replacement check, you will have to provide an indemnity to the Bank relating to any claim that can arise from the previously issued check.

    Dealing with a certified check is usually very safe. It is as good as paying with cash. The disadvantages are that you have to visit the bank to have your check certified and the fee that you pay for this service. Other secure and more convenient ways of receiving and making payment are through a credit card or by using an online service such as Pay Pal. However this type of payment is not accepted in every situation.

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    Protect Yourself

    Nowadays, there are many scams relating to checks and money transactions. Never agree to pay more than the purchase value as there are many scans relating to overpayment of checks. If you have reason to doubt that the certified check you have received is not genuine, contact the bank that issued the check and verify it is genuine by quoting the amount and check number. You can also lodge a complaint or seek help by calling the Federal Trade Commission at 1-877-FTC-HELP (1-877-382-4357). A properly prepared certified check should ensure prompt payment and satisfactory completion of a transaction.