What is a cashier's check? How it works and how it differs from a personal check

What it is

That is the OCC's wording in its banking glossary. With a personal check, the money comes out of your account. With a cashier's check, you pay the bank, and the bank writes a check on its own funds. The bank is the one promising to pay.

People ask for one when a seller wants more certainty than a personal check gives, such as a car deposit or a security deposit.

Stop payments, and holds on a deposit

The OCC's HelpWithMyBank.gov says that generally a customer cannot order a stop payment on a cashier's check, because it is drawn directly on the bank that issues it, not on your account. If one is lost or you suspect fraud, contact the bank right away.

If you are the one depositing one, the bank can still hold the money. HelpWithMyBank.gov says that when cashier's checks deposited in one day exceed $5,525, the bank can hold the excess, and it can hold the whole amount if it has reasonable cause to believe the check cannot be collected.

It also warns that funds may become available before the bank has been able to verify the check. If the check turns out to be fake, the bank may reverse the deposit or ask you to repay, which is how many scams work.

For a couple

The check is made out to someone and drawn on the bank, so whose account it came from matters when you need it back. If it comes from a joint account, both of you should know it was bought.

Buying a car with one

• The seller wants $8,000 and will not take a personal check
• You pay your bank $8,000 from your account
• The bank issues a check for $8,000 drawn on its own funds
• Your account falls by $8,000 right away: $12,500 - $8,000 = $4,500
• Any bank fee for the check comes on top; ask what yours charges