A personal check, or personal cheque in British English, allows you to send someone money from your personal bank account. A bank check, also commonly referred to as a cashier's check, is drawn against the bank's funds rather than yours. A certified check is another special type of check that is drawn against your funds with a guarantee from the bank that the money is there. Many large purchases of items like cars and property require certified or cashier's checks.
Personal checks draw from funds in your personal bank account, while bank checks draw on the bank's funds.
How Personal Checks Work
A personal check is a legal document that tells a bank to give a certain person a specified amount of money from a particular bank account. You can fill one out and issue it to essentially anyone, and they can deposit it into their bank account or cash it. The money will be taken from your account.
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Normally if you have a checking account or another account with check-writing capabilities, such as certain money market accounts, you can order checks from the bank preprinted with your banking account number and the bank's routing number. When you need to pay someone, you can write their name or business name on a check, date it, write the amount you wish to pay and sign the check.
Personal Checks with Insufficient Funds
If you give someone a personal check and the money is not in your account when they attempt to cash or deposit it, the check will be returned as having insufficient funds. The person or company that issued the check and the person or company that tried to cash it may owe fees.
If you write a check with insufficient funds and have an overdraft protection plan, the bank may loan you the money to cover the check, but the fees and interest can be steep. Some banks may automatically transfer the funds from another account, such as a savings account, to cover the amount of the check if the money is available.
It's sometimes possible for banks to determine if there is sufficient money in an account to deposit or cash a check when you present it to a teller. Some businesses can also cash checks immediately by treating them as digital funds transfers.
Risks of Taking Checks
Because verifying there's money in the account isn't always possible, there's a certain amount of risk in accepting a personal check for payment, especially from someone you don't know well. If you can, you will want to make sure that a check clears before giving anything of value in exchange for it.
Make sure you have a way to contact the person who issued you a check if there is a problem. While intentionally writing checks that aren't backed by actual money in the bank is a crime, that's not to say it doesn't happen accidentally. Bank errors and unrelated fraudulent withdrawals can also cause checks to bounce, or be rejected, through no fault of the issuer.
Personal checks also take some time to clear, or settle, and until they do, the funds may not be fully available in your account. Depending on the bank where the check is issued and where it is deposited, checks can take a few days or longer to settle. Your bank may make some funds available for you to spend before a check you deposit is fully settled.
Understanding Bank or Cashier's Checks
A cashier's check is a check issued against a bank's own funds. It's essentially guaranteed not to bounce, unlike a personal check. They usually also settle quicker than personal checks, meaning that funds can be available sooner from depositing a cashier's check than a traditional personal check.
Those two factors make cashier's checks advantageous for certain transactions. For instance, using a cashier's check would be more convenient for buying expensive items like cars and real estate, where sellers don't want to worry that the money will take a long time to become available or not be available at all.
Getting cashier's checks usually requires either physically stopping by a bank branch, ordering them online or ordering over the phone. The funds are transferred from your account to the bank. That's different from personal checks, which you can write out or print essentially whenever you want. Banks often also charge money for issuing and delivering cashier's checks. They're generally not used or practical to use for everyday purposes.
Understanding Certified Checks
Certified checks are another special kind of check. They are in some ways a hybrid between cashier's checks and personal checks. A certified check is issued against the funds in your account, but your bank guarantees that your account has the money there, usually by putting a hold on the money until the check is cashed or deposited. You generally must visit a bank branch to have a check certified, and the bank will verify that the check is valid and bears a proper signature.
Working with Money Orders
Another type of financial instrument that works similar to a check is a money order. This is a document similar to a check that is prepaid, usually in cash, so that the recipient can be guaranteed that the money is present. They're also handy for people who don't have bank accounts and want to send money some other way than paying cash.
Money orders can be purchased at some banks as well as businesses like supermarkets, convenience stores, drug stores and check cashing stores that work with money transfer services. Companies like Western Union and MoneyGram ultimately issue the money orders. The United States Postal Service and other post offices around the world also issue and cash money orders. Like a check, a money order must be made out to a specific person and signed by the person sending it.
You generally must pay a fee to purchase a money order. Shop around for a service that issues them at a good price. If you lose a money order, contact the organization that issued it immediately. You may have to pay a fee to have it replaced or refunded.
Using a Debit Card
In many cases, debit and credit cards have replaced the need to use personal checks. Debit cards allow you to make a payment in a store or online using funds from your bank account, similar to writing a check. Transactions often process faster, and some debit cards offer rewards as well based on how much you spend. Cashier's checks, certified checks and money orders are still valuable for situations in which you must be guaranteed the funds are available and where debit cards are impractical, such as large purchases exceeding ordinary debit and credit card spending limits.
Watching Out for Fraud
Even though legitimate cashier's checks, certified checks and money orders should not bounce, that doesn't mean that every document purporting to be one of those financial instruments is actually valid. If you receive any kind of check or money order and aren't sure whether it is valid, exercise caution. Call the institution that issued it and verify that the document is legitimate and that the amount printed on it is correct. If it's a personal check, try to verify that the money is actually in the account.