Legal Definitions - cashier's check

A cashier's check is a special type of check where the bank itself guarantees the payment. Unlike a personal check, which draws funds from an individual's account, a cashier's check is drawn by the bank on its own funds. This means the bank holds the money and promises to pay the specified amount to the person or entity named on the check (the payee).

Because the bank's own funds are used and guaranteed, cashier's checks are considered a very secure form of payment. They eliminate the risk of insufficient funds that can occur with a personal check, providing assurance to the recipient that the payment will clear.

Examples:

• Purchasing a Vehicle from a Private Seller: Imagine Maria is buying a used car from a private seller for $20,000. The seller is hesitant to accept a personal check because they don't know Maria and want to ensure the funds are legitimate before handing over the car title. They request payment via cashier's check.

  Illustration: Maria goes to her bank, pays $20,000 (plus a small fee) from her savings account, and the bank issues a cashier's check made out to the car seller. When the seller receives this check, they can be confident that the payment is guaranteed by the bank and will not bounce, allowing them to complete the sale securely.

• Paying a Security Deposit for a Rental Property: John is moving into a new apartment, and his landlord requires a security deposit of $1,500. To ensure the deposit is valid and immediately available, the landlord specifies that it must be paid with a cashier's check.

  Illustration: John visits his bank and requests a cashier's check for $1,500, payable to his landlord. The bank debits $1,500 from John's account and issues the check. The landlord accepts it without concern, knowing that the funds are backed by the bank and are not dependent on the balance in John's personal checking account.

• Settling a Legal Obligation: A small business, "Tech Solutions Inc.," owes a settlement payment of $5,000 to a former client as part of a dispute resolution. The client's attorney insists on a cashier's check to ensure the payment is secure and final.

  Illustration: Tech Solutions Inc. obtains a cashier's check from its corporate bank account for $5,000, made payable to the former client. This method of payment provides the client with the assurance that the settlement funds are guaranteed by the bank, preventing any delays or complications that might arise from a standard business check.