Difference Between Cashier’s Check and a Personal Check

A cashiers check differs from a personal check in several ways. Those include in terms of perceived safety, the underlying guarantee, clearance time, cost and appearance.

Perceived safety

One principal difference between a cashier’s check and a personal check is in terms of ‘safety’. As long as it is genuine [not forged], a cashier’s check is perceived to be safer (on the part of the person being paid through it) than a personal check. That is because a cashier’s check is guaranteed by the (issuing) bank’s own funds. It is drawn against the funds in the bank’s own account. It is unlike a personal check, which is simply supposed to be backed by the funds in the drawer’s account, and which can therefore only be accepted on ‘good faith’ basis.

With a personal check there is always the possibility, however remote, of the drawer’s account not having enough money to cover the amount indicated on the check. So there is always the possibility of the check ‘bouncing’, due to inadequate funds. A person with only $200 in his account can very well write (and issue to another fellow) a personal check for $5,000. The person to whom such a check is issued would only get to know that the drawer doesn’t have enough funds upon depositing the check. By then, it may be too late…

Underlying guarantee

This is related to the issue of ‘perceived safety’ covered above. With a cashier’s check, the guarantee is much stronger. This is because the cashier’s check is actually not drawn/written by a person/an individual. It is drawn by a bank, and it is rather unlikely that a bank would issue a bouncing check. In other words, it is unlikely that a check drawn by a bank would bounce on account of things like inadequate funds in the (bank’s own) account. So with a cashier’s check, the bank is the ‘drawer’ of the check. The actual work of writing the check is done by an officer of the bank — a cashier — hence the name ‘cashier’s check’.

The bank first receives money from the person who wants to make a payment using a cashier’s check. The bank then deposits that money into its own account. Alternatively, if the person seeking to get a cashier’s check is an accountholder, an amount equivalent to the check value is frozen in his account. That, in effect, is as good as having the funds transferred from the check purchaser’s account to the bank’s own account.

Then the bank (through its ‘cashier’) proceeds to write a check for that amount. The person who receives the check knows that there is certainty of getting the money, because the money is in the banking institution’s own account. This is definitely different from a personal check. The process of issuing a personal check simply entails the drawer picking his checkbook, filling in the payee and amount details, then plucking out the check leaf and handing it to the recipient/payee! There is no knowing whether the drawer’s account actually has enough money to cover the amount indicated on the check. Quite often, it turns out that the amount of money in the drawer’s account is less than what is indicated on the check. So the check bounces – yet by that time, the payee (check recipient) may already have parted with his goods or services… That, by the way, is why some businesses insist on cashier’s checks for certain transactions.

Check clearance time

Another importance difference between cashier’s checks and personal checks is in terms of the time it takes for the money to become available to the payee. So you find that the funds in the cashier’s check tend to become available to the payees much faster than the funds in a personal check. In most cases, there is actually a ‘next day’ availability rule for amounts below $5,000. On the other hand, it can take quite a few days before the payee actually lays his hands on the funds from a personal check.

Check cost

A cashier’s check will typically tend to cost more than a personal check. Look at it this way: a personal check is simply an instruction for the bank to draw funds from drawer’s (issuer’s) account and then pay the funds to the payee (recipient). Personal checks are mass produced, bound into check books, and handed to account-holders at what translates into a negligible cost per check leaf.

On the other hand, a single cashier’s check is a unique document, meant to be purchased after a special arrangement. A cashier’s check purchase entails a bank getting actual funds from the check drawer, depositing the funds into its own account, then issuing a check for that amount… So it is a more sophisticated service, for which there is a fee to be paid: hence the higher cost of a cashier’s check.

You also have to appreciate that a cashier’s check is typically a high security document, with all manner of security features: hence its higher cost.

Check appearance

At a most basic level, there is (prominent) text on the cashier’s check, clearly indicating that it is a ‘cashier’s check’. This is usually very conspicuous, on the check’s front side (face). So if someone hands you a ‘check’ on which the words ‘cashier’s check’ are not clearly indicated, then you know that the paper is anything else but a cashier’s check. A personal check on the other hand has no such special identification. On a personal check, you will only tend to find the name and address of the drawer, the bank’s name, date and instructions for the bank to pay ‘to the order of’ X or Y amount. There is usually no text stating that it is a personal check. You know that it is a personal check just by looking at it. But with a cashier’s check, there is prominent text actually stating that it is a cashier’s check.