Is a Check Considered Cash?

Many merchants refuse to accept personal checks as payment.

Although nearly everyone knows that money itself is cash, many people are unaware that many forms of payment count as cash equivalents because they are readily available to pay financial obligations. Most personal checks do not count as cash, especially if they draw on "uncollected funds," that is, funds that the bank has not fully processed. Nonetheless, some checks are considered to be cash equivalents.

Personal Checks

When you issue a check to pay a bill drawn against your personal bank account, it is not considered cash, even if you have enough money to cover it at the time. That is because there is no guarantee that the funds to cover the check will still be available once the merchant or recipient actually presents it for payment. You may withdraw the funds from your account so that the check bounces, or you may issue a stop payment request that negates payment of the check.

Certified Checks

A certified check carries a guarantee from the bank that the recipient will receive the full face value of the check from the issuing person's bank account. Unlike a conventional personal check, a certified check is considered to be a cash equivalent. The bank will often place a hold on the bank account of the issuing person in the amount of the check, according to Banks often prohibit stop payments on certified checks. However, banks also sometimes place time limits on certified checks, "Credit Today" states.

Cashier's Checks

A cashier's check is also known as a bank draft, teller's check or a bank check. It is a check issued by the bank in the name of the issuer, who pays the bank for the check, and names a recipient whose name appears as the payee for the check, according to the Free Legal Dictionary. A cashier's check is also considered a cash equivalent because it does not depend on whether funds are available in the issuing person's bank account.

Cashier's Checks vs. Certified Checks

Cashier's checks and certified checks are each considered cash equivalents, but they differ from one another. Although the bank may place a hold on the issuing person's account to cover a certified check, the money remains in the account until the check is actually presented for payment. Cashier's checks are more like money orders or wire transfers, because the money to cover a check is paid by the issuer before the check is presented to the recipient.

references & resources