Bank Check vs. Certified Check

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Bank checks and certified checks are two types of “official check”, or a check that is guaranteed to clear. Both types of official checks are verified and guaranteed by the issuing bank. However, they are not the same. There are a few key differences between a bank check and a certified check, most notably the account against which each type of check is drawn.

TL;DR (Too Long; Didn't Read)

With a bank check, the bank removes funds from the payer’s account and then writes the check against this escrow account to guarantee payment. With a certified check, the check is drawn against the payer’s checking account with a guarantee from the bank that the account contains sufficient funds to cover the transaction.

What Is a Bank Check?

A bank check, also known (confusingly) as a certified bank check or cashier’s check, is a check that’s issued and guaranteed by a bank. When a checking account holder obtains a bank check, the bank removes the specific amount of money from the payer’s checking account and moves it into a separate account. In nearly all cases, an individual needs to have a checking account with the bank to use a bank check. Then, when the check is cashed or deposited by its recipient, the funds are withdrawn from this secure account. Because the money is taken directly from the payer’s account and set aside for the recipient, a bank check cannot bounce.

What Is a Certified Check?

A certified check doesn’t involve removing funds from the payer’s account to guarantee payment. Instead, the bank’s certification that the payer’s signature is legitimate and that there are sufficient funds in his account provides the security that comes with using a certified check. When a certified check is deposited or cashed, the funds are taken directly from the account listed on the check.

When the bank certifies a check, it freezes the amount the check is worth in the payer’s account in order to ensure that the check can be cashed or deposited. However, this can be less secure than working with an escrow account like a bank check involves. Banks often impose restrictions to increase the security of the checks they certify, These restrictions generally include terms like:

  • void after 90 days
  • void if the signature is deemed fraudulent
  • void if the check was erroneously certified

A bank is not obligated to honor a fraudulent certified check. This is as true in cases where the payer’s signature is legitimate, but the certification is not, as it is in cases where both the signature and the certification are forged. The latter scenario is an incident of identity theft. When the bank determines a certified check is a forgery, the check’s writer may be held liable for the cost of the check, and the damages his actions cause others involved in the transaction to suffer.

Safer Way to Pay

Businesses use certified and bank checks because they’re a safer way to pay and get paid. With a personal check, the only guarantee the recipient has is the payer’s promise that the check will clear, which is no guarantee at all. Using bank or certified checks is safer than using cash to make purchases, because:

  • If a payment needs to be canceled, the vendor can cancel the check easily with the issuing bank.

  • There is a record of when a check was created and when it was deposited, so it is possible to resolve disputes with documentation.

Another reason why businesses, and in some cases, individuals, use bank checks is that they do not contain the payer’s checking account number such as a personal check does. By using a bank check this way, a business can reduce its chance of becoming an identity fraud target.

When Cash Is Impractical

Businesses also use certified and bank checks to make large purchases that are impractical to make with cash, though a valid bank check or certified check is the same as cash. As such, a vendor can accept one without having to be concerned about the payer’s credit score. Often, bank checks and certified checks are used instead of cash because they are safer to transport and guarantee. In addition to these benefits, it is easier to protect a check from getting lost. You also cannot miscount a check like you can miscount cash.

In some cases, a bank is liable for paying a certified check from its funds. Whether the bank is responsible for a certified check depends on the circumstances surrounding the incident. When the certification on the check is forged, the bank is not liable for paying it. But when the bank certifies a check in error, the check may still be legitimate, and the bank may be required to pay the recipient.

When there is a problem with a certified check that results in the payer not being able to use the check, she may seek compensation for her related damages from the bank or the customer, depending on which party is determined to be the negligent party under the rules imposed by the Uniform Commercial Code.

Benefits of Certified Check vs. Bank Check

Bank checks and certified checks have a significant advantage over personal checks and credit; they are guaranteed. Even a payer with excellent credit can default on their payment or declare bankruptcy, which puts the recipient in the difficult position of having to collect the debts she is owed. In cases where a delinquent payer declares bankruptcy, the creditor might never get paid or might have to settle for receiving a portion of the total amount the payer owed.

Personal checks also don’t offer a guarantee that the recipient will get paid. A check can “bounce”, which means there are insufficient funds in the payer’s checking account to cover it, and this can leave the recipient at a financial loss. Although a bounced check victim can file a lawsuit to pursue compensation for the damages he suffered from a bad check, this is an expensive, time-consuming process that can end up costing the victim more money than he would have received if the check had cleared.

Requiring a purchaser to use a bank check or a certified check alleviates a vendor’s concern about getting paid promptly and in full.

Why Would a Business Choose a Certified Check vs. Cashier's Check or Vice Versa?

Generally, businesses choose bank checks over certified checks. Bank checks are becoming more and more popular for companies to use because there is a lower chance of forgery with bank checks. They are the safer, more secure option. A certified check can be forged in a few different ways, and a forged certified check can spell legal difficulties and expenses for every party involved in the transaction.

When either type of official check is lost, destroyed or stolen, the issuing bank can require a security or bond payment before issuing a new one. Additionally, the bank has the right to refuse to honor a check if it has been modified in any way, even if the signature and certification are legitimate.

For example, changing the amount of money a certified check is for, even when there are sufficient funds in the payer’s account to cover it, can render the check void. When the bank wrongfully dishonors a legitimate check, it may be held liable for the damages either party involved in the transaction suffer because of the bank’s error.

Start With a Business Checking Account

To write certified checks from your business, you need to establish a checking account for the business. A business bank account legitimizes your business. If you don't have a business checking account, you can obtain a bank check from a bank or a credit union, or you can use a money order to make a larger purchase.

As a business owner, you should have a checking account for your business because it provides an additional layer of legal protection by creating an entity separate from you as an individual. If your business is sued, your assets are protected when your business assets are kept in a separate account. Having a separate business account also makes it easier for you to manage sales and expense transactions and handle your business’ tax bill.

You might need to open a few bank accounts for your business if you’re not sure if one account is sufficient, or if you’ll need multiple accounts for multiple expenses and income streams. Talk to a business or financial advisor to determine the right answer for you and your business.

Shop Around for the Right Bank

Shop around for the right bank at which to open your business checking account and any other accounts you might want, like a business credit card. Different banks offer different account servicing options, and some provide specialized services for specific industries. The bank where you have your personal account could be the right one for your business account, but do your research instead of using this bank because it is easy.

With your federal tax ID and registered business name in hand, head to the bank to open the account. You can also open your account online with some banks. You will need to provide proof that your business is registered with the state where it is based and that you are the business owner.

Other Essential Business Accounts

You also need to open a merchant account for your business to accept payments from customers. If you anticipate receiving credit card payments, open a credit card merchant account. While creating these bank accounts, you might also want to set up online payment accounts on platforms like PayPal or Dwolla and link them to your merchant account, which will make it easy for funds from sales to go directly into your accounts. Keep a comprehensive record of all your business bank accounts and the online platforms to which they are linked.

Using certified checks and bank checks are one way to make and receive secure payments, but when you are doing online transactions, your records and account security measures such as strong passwords are your best tools against fraud. In your records, be sure to keep track of:

  • all business expenses, such as employee salaries and equipment acquisition costs
  • your business taxes
  • all business income
  • any charitable donations the business makes

With the bank you choose, you can obtain bank checks and certified checks to use them as your business needs. Often, these kinds of checks are used to buy large pieces of equipment, such as a company vehicle or specialized machinery. You also might use this type of check to pay the security deposit and first month’s rent on a new lease for office or shop space. With an official check, you have the peace of mind that your payment will be accepted, and the other party can rest assured that the check your business wrote will clear.


About the Author

Lindsay Kramer has been a full-time writer since 2014. In that time, she's experienced the ups, downs and crazy twists life tends to take when you're launching, building and leading a small business. As a small business owner, her favorite aspect about writing in this field is helping other small business owners and aspiring entrepreneurs become more fluent in the terminology and concepts they face in this role. Previously, she's written on entrepreneurship for 99designs and covered business law topics for law firms.