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What is a certified check?
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27th Nov 2009 by Ellen Silverman
A certified check is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check and thus “certifies”, at the time the check is written. Those funds are then set aside in the bank's internal account until the check is cashed or returned by the payee. Thus, a certified check cannot "bounce", and, in this manner, its liquidity is similar to cash.
Because certified checks become the issuing bank's liability, banks will typically set the amount of money listed on the certified check aside in the holder's account so that there will always be money available to honor the check.
There are some downsides to using certified checks. For example, banks will usually charge a fee for certifying checks and that the depositor usually cannot place a stop payment order on a certified check.
A certified check is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check and thus “certifies”, at the time the check is written. Those funds are then set aside in the bank's internal account until the check is cashed or returned by the payee. Thus, a certified check cannot "bounce", and, in this manner, its liquidity is similar to cash.
Because certified checks become the issuing bank's liability, banks will typically set the amount of money listed on the certified check aside in the holder's account so that there will always be money available to honor the check.
There are some downsides to using certified checks. For example, banks will usually charge a fee for certifying checks and that the depositor usually cannot place a stop payment order on a certified check.
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4th Nov 2009 In Banking
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Subjects: certified check,