Certified Check - Explained
What is a Certified Check?
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What is a Certified Check?
A certified check is an approval given by a drawee 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.
Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY
How Does is a Certified Check Work?
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.
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.
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.
- Commercial Paper (Intro)
- What is Commercial Paper?
- Negotiable Instrument
- What are the common types of commercial paper?
- Promissory Note
- Cashier's Check
- Convenience Check
- Certified Check
- Substitute Check
- Bill of Exchange
- Bank Draft Definition
- Sight Draft Definition
- Bankers Acceptance
- Who is a Holder of a negotiable instrument?
- Commercial Paper Funding Program
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
- When does commercial paper contain an Unconditional promise to pay?
- Backup Line of Credit
- What is Payable on Demand or Payable on Time?
- What is Order Paper and Bearer Paper?
- Bearer Form
- How is a payee identified on the negotiable instrument?
- What rules does the court apply in determining negotiability?
- How is commercial paper negotiated to a holder?
- What is Transfer of a negotiable instrument?
- What is Indorsement of a negotiable instrument?
- What are the various types of indorsement?
- Bank Endorsement
- Blank Endorsement
- Accommodation Endorsement
- How does a holder receive payment on a negotiable instrument?
- Who is potentially liable on (or obligated to pay) a negotiable instrument?
- When is an individual liable for a representative signing a negotiable instrument?
- What rules apply if a holder loses a negotiable instrument?
- When is payment of a negotiable instrument overdue?
- What effect does a negotiable instrument have on the underlying obligation?
- What is a holder in due course?
- What are the requirements for a holder to become a holder in due course?
- Receive an instrument for value?
- Receive an instrument in good faith?
- Receive an instrument without notice of a valid defense?
- How does discharge of the Underlying Obligation affect a holder in due course?
- What is the Shelter Rule?
- Can you limit a transferee from becoming a holder in due course?
- Personal Defenses?
- Real Defenses?
- What is a Claim in Recoupment?
- What are the rights of a holder in due course if the instrument involves a consumer transaction?
- What happens if a negotiable instrument is Forged?
- What happens if a negotiable instrument is Stolen?
- Guaranty or Guarantee
- Letter of Guarantee
- Personal Guarantee
What is the role of a Guarantor or Surety of a negotiable instrument?
- Accommodation Paper Definition
- Secondary Liability
- Avalize Definition
- What is an Accord & Satisfaction?
- What is primary and secondary liability on an instrument?
- What is Drawer or Maker Liability for a negotiable instrument?
- What is Transferor Warranty of a negotiable instrument?
- What is Indorser Warranty of a negotiable instrument?
- What is Presentment Warranty of a negotiable instrument?
- What is a warrantors liability for a dishonored note or draft?
- What is the time limitation for warranty of a negotiable instrument?
- When are the warranties of a negotiable instrument discharged?