Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Certified Check

What it is:

A certified check is a check for which the issuing bank guarantees payment.

How it works (Example):

Let's assume you want to rent an apartment from the XYZ Leasing Company but your credit is bad. XYZ Leasing Company may require you to pay with a certified check, meaning that your bank will issue a check to XYZ from your account and guarantee that there will be enough cash in the account to pay XYZ. The bank also guarantees that the signature on the check is yours.

Why it Matters:

Certified checks are a good way for sellers to feel more secure about the source of buyer's funds because banks issuing certified checks generally lock the amount of the check up to ensure that the depositor does not withdraw the funds and force the check to bounce.

Banks almost always charge fees to issue certified checks and cannot halt the payment of a certified check without the original receipt.