Certified Check Definition
A certified check is an approval given by an institution confirming that there are enough funds to pay it. The bank makes the certification by placing its signature on the check. It is one of the most commonly used modes of payment in the world. For this reason, companies and individuals prefer using it to settle outstanding balances and the purchases made amongst others. When the two mentioned entities transact using the certified check, the beneficiary of the check just approaches the mentioned financial entity and withdraws the specified amount.
A Little More on What is a Certified Check
It is normally issued by an institution approving that there are enough funds to cover the check. For this check to be certified, it must have the bank signature. The check contains the following words “I accept”, “good” or “seen” which are usually made by the drawee. The issuing bank guarantees the recipient of the check that the stated amount will be paid within the period the check is valid.
As far as there are many types of checks, the certified check is a unique type that can be used to pay money to a third party just like any other type of check. The fact that it has a guarantee of the issuing bank makes it the safest way to receive payments even amongst strangers.
Despite all these benefits of certified checks, there have been challenges because of falsification of these payment documents. Always take precautions and do not be super confident with all these checks that you come across. You should be in a position to distinguish genuine checks so that you don’t fall for scammers. Therefore, to be safe, it is recommended that you buy these checks directly from the banks even if it means walking to the banks to confirm their authenticity. Lastly, a genuine check must contain the denomination of the issuing bank, the validity period, the amount involved, and the details of the payee and the signature of the issuing authority.
Why the Need for A Certified Check?
A certified check is a very critical mode of payment since it gives credibility to the issuer and provides assurance to the beneficiary that payment will be made.
It is usually preferred in cases involving large sums of transactions and where it would be too risky to use cash. It is also used in situations where personal checks may not prove very reliable to the recipient.
Therefore, a certified check eliminates the risk of default in payments hence satisfying the needs of both the payer and the recipient.
Certified checks are mostly used in large transactions like:
- Buying of a vehicle or home, or when exchanging a title.
- Paying for a home or renting an apartment
- When paying for the buying of a business.
What is the importance of certified checks in large payment situations?
When buying expensive equipment like a tractor going for $10,000, a certified check if preferred in that case unlike using a personal check. This is because a personal check can bounce, unlike a certified check which will offer credibility and reassurance as much as they may not be fraud-proof.
How to acquire a Certified Check?
The following steps are followed when acquiring a certified check:
- Instruct your bank or credit union to offer certified checks.
- Ensure there are enough funds in your account to cover the certified check.
- Visit the customer representative of a local bank to assist you to fill out a certified check.
- Be ready to present your personal details like ID to your financial institution.
- Settle the fee required to issue the certified check.
- Retain the receipt until the check clears and transaction occurs.
Generally, a certified check clears quickly normally the next business day after it is deposited by the beneficiary.
In cases where your certified check exceeds $ 5,000, many banks usually pay the first $5,000 to the recipient the next day after depositing the check and clear the balance within two business days.
References for Certified Check
Academic Research on Certified Checks
- Bank runs and private remedies, Dwyer Jr, G. P., & Gilbert, R. A. (1989). Federal Reserve Bank of St. Louis Review, 71(3), 43-61. This article tries to explain the private remedies for bank runs and the economy
- The electronic check architecture, Anderson, M. (1998). Financial Services Technology Consortium, 123. This article tries to highlight to us on how electronic check performs payments and other financial functions of paper checks.
- Negotiable Instruments: The Bank Customer’s Ability to Prevent Payment on Various Forms of Checks, Wallach, G. (1978). Negotiable Instruments: The Bank Customer’s Ability to Prevent Payment on Various Forms of Checks. Ind. L. Rev., 11, 579. The author is explaining to us the ability of the bank customers to avoid payment on different types of checks.
- Proposed Uniform Bank Collections Act and Possibility of Recodification of the Law on Negotiable Instruments, Beutel, F. K. (1934). Tul. L. Rev., 9, 378. This paper is talking about revising the laws on Negotiable Instruments in the proposed Bank Collections Act.
- Stop Payment Orders Under the Uniform Commercial Code, Hawkland, W. D. (1970). Stop Payment Orders Under the Uniform Commercial Code. Com. LJ, 75, 53. This section is talking about requests made to financial institutions to cancel a check or payment that has not been processed.
- Simple certified e-check with a partial PKI solution, Hsin, W. J., &Harn, L. (2005, March). In Proceedings of the 43rd annual Southeast regional conference-Volume 2 (pp. 185-190). This article is talking about electronic checks and is encouraging people to adopt it because it provides privacy and flexibility. It is also easily implemented besides the available internet banking without extra costs.
- Article Four: Bank Deposits and Collections, Davis, H. O. (1965). NCL Rev., 44, 627. The author is talking about the money that is placed in the banking institutions for safekeeping and collection of checks on behalf of the depositor.
- Cashier’s Checks, Certified Checks, and True Cash Equivalence, Shupack, P. M. (1984). Cardozo L. Rev., 6, 467. The article is addressing certified checks, cashier’s checks and true cash equivalence and also how they relate and their implications.
- Certified Checks, Hays, J. T. (1959). Wyo. LJ, 14, 39. The paper is talking more about certified checks, its meaning, and use.
- How Bank Collection Works-Article 4 of the Uniform Commercial Code, Malcolm, W. D. (1965). How Bank Collection Works-Article 4 of the Uniform Commercial Code. Howard LJ, 11, 71. This section is concerned with how banks use their collections and how those collections work.
- State of the art in electronic payment systems, Asokan, N., Janson, P., Steiner, M., &Waidner, M. (2000). State of the art in electronic payment systems. In Advances in Computers (Vol. 53, pp. 425-449). The author is trying to put across the security measures for electronic payment systems by analyzing the design of the electronic payment systems. The article insists that as far as electronic funds are secure, securing payments over open internet may present some challenges.
- Certified Checks and Funds Redirection, Lord, R. A. (1979). Certified Checks and Funds Redirection. Vill. L. Rev., 24, 28. The paper is addressing us on how the excess funds can be redirected to the third party.