Legal Definitions - teller's check

A teller's check is a type of check issued by a bank. Unlike a personal check, which is drawn on an individual's account, a teller's check is drawn by the bank itself, either on its own funds or on an account it holds at another bank. Customers typically purchase teller's checks from their bank using cash or funds from their own account. Because the check is backed by the issuing bank, it is considered a secure form of payment, similar to a cashier's check, and is often required for large transactions where the recipient needs assurance that the funds are guaranteed.

Here are some examples of when a teller's check might be used:

• Purchasing a Vehicle from a Private Seller: Imagine Sarah wants to buy a used car directly from an individual seller. The seller is hesitant to accept a personal check from Sarah because they don't know her and want to ensure the payment clears immediately. Sarah can go to her bank, pay for a teller's check using funds from her savings account, and then give this check to the car seller. This illustrates a teller's check because the payment is guaranteed by Sarah's bank, giving the seller confidence that the funds are legitimate and will not bounce.

• Making an Earnest Money Deposit for a Home: When John makes an offer on a house, the real estate agent or title company often requires an earnest money deposit to show his serious intent to purchase. This deposit is usually a significant amount and must be in guaranteed funds. John obtains a teller's check from his bank for the required deposit amount and submits it with his offer. This demonstrates the use of a teller's check for a high-value transaction where the recipient (the seller or their agent) needs assurance of immediate and guaranteed payment, which a personal check cannot provide.

• Paying a Large Security Deposit for a Rental Property: A small business, "Tech Solutions Inc.," is leasing a new office space and the landlord requires a substantial security deposit in guaranteed funds before they can move in. The business's accountant arranges for a teller's check from their corporate bank account to pay the landlord. This example highlights how a teller's check provides a reliable and secure method for businesses to make large, critical payments where the payee demands assured funds, protecting both parties in the transaction.