When consumers write personal checks, the recipients don’t have a guarantee that the funds are actually there. They have to wait until the check clears their banks, and they sometimes find out the check bounced.
Banks issue and guarantee cashier’s checks. With these, the funds are always there, offering certainty to a certain transaction. First, the bank guarantees the account holder has the funds. Then the bank withdraws the money and issues the check.
This means the check cannot bounce. The funds are guaranteed, so it’s a safe and secure way to spend and receive money.
Reasons to Use a Cashier’s Check
Consumers typically use cashier’s checks when they need to complete a cash transaction without using a personal check. For example, if someone wants to buy a vehicle with cash, the dealership might be wary to take a personal check for that much money. The buyer can go to the bank, get a cashier’s check, and pay for the vehicle.
Buyers also use cashier’s checks for real estate deals. These deals must be settled quickly, and cashier’s checks go through faster than personal checks. They are guaranteed, so they don’t take as long to clear the bank.
Cashier’s Check Fees
Banks charge a fee to issue cashier’s checks. Bank of America and Wells Fargo are two of the most popular financial institutions, so let’s look at the fees they charge.
Bank of America
Bank of America issues cashier’s checks to customers who have a checking or savings account. Non-account holders cannot get cashier’s checks from the institution. The bank charges a $10 fee for these checks. It does not charge a fee for incoming cashier’s checks or domestic wire transfers.
Wells Fargo also charges a $10 fee for cashier’s checks. Account holders can order the checks online, but there is an $8 delivery fee assessed to all online orders. It charges $15 for incoming wire transfers.
How to Avoid Cashier’s Check Scams
Cashier’s checks are considered a safe form of payment. Unfortunately, that makes them attractive to scammers. It’s important for consumers to understand cashier’s check scams so they can avoid them.
Scammers create fraudulent cashier’s checks. People assume the checks are valid because banks guarantee cashier’s checks. However, if the check is counterfeit then a bank didn’t issue it and won’t guarantee it.
Let’s look at some examples of how this works.
Many people are targeted when they sell goods in a marketplace. They list their items for sale and someone pays with a cashier’s check. The person either ships or hands over the items as soon as the cashier’s check is received. The cashier’s check goes into the bank, and days later, the person finds out the check has bounced. The buyer is long gone and the seller can’t get the money or the items back.
Another popular scam has to do with sending people more money than necessary. Two parties negotiate the cost of a product or service. The buyer sends the seller a cashier’s check for more than the agreed-upon price and asks the seller to wire some of the money back. The seller deposits the check, and since it is a cashier’s check, the bank credits it the next business day. The seller wires the money to the buyer’s account, and a few days later the cashier’s check bounces.
The “unexpected windfall” scam is also popular with fraudsters. Scammers send out letters informing people they have won a foreign lottery or are the beneficiaries of an estate. These are just two examples. Scammers use lots of reasons for the windfall.
The recipient has to pay a processing fee or a tax to release the funds, and the sender has enclosed a cashier’s check to cover the fee. The person is instructed to deposit the cashier’s check and wire the money to a third party. The money is long gone before the person realizes the check was fraudulent. His or her bank account could go negative, depending on how much money was in it prior to depositing the check.
Finally, there is the mystery shopping scam. Scammers mail letters inviting people to act as mystery shoppers. As mystery shoppers, they need to purchase items in the store and report on the service. The scammer encloses a cashier’s check to cover the purchase price. The check also includes money to pay for the person’s mystery shopping services. There is also an overpayment, so the person needs to wire the remaining money back to a third party.
Of course, the check is fraudulent, so the person is out the money he or she wired. The person also might have to pay bank fees for the bounced check. The fees charged depend on the bank.
How to Avoid the Scams
Never part with money or items until the paying bank has released the funds. The funds from cashier’s check are available the next business day, but that does not mean the paying bank has paid for the check. This can take several days. Wait several days to make sure the funds have cleared.
Also, never accept a cashier’s check for more than a purchase price. There is no reason to send money back to a buyer. If someone asks you to do this, assume it is a scam and void the transaction.
If possible, go to the bank with someone when he or she is getting a cashier’s check. That way you can verify the check’s authenticity.
Finally, ask for physical cash when selling items locally. If people can get a cashier’s check then they also have access to cash. Give them a receipt for the cash transaction so they feel secure.
While scams are worth taking note of, cashier’s checks are typically a safe way to send and receive money. As long as the checks are from a legitimate financial institution then they are guaranteed, allowing people to make transactions without fear.