What is a Certified Check?

A certified check is a check that your banking institution guarantees with funds in your own bank account. To obtain a certified check to, for example, provide a down payment when buying a car or to pay your landlord's required security deposit, you need to go in person to your bank and have the cashier prepare the check for you, with the payee's name on the check and your signature. Your banking institution will then reserve that amount of money in your account as untouchable -- thus guaranteeing the certified check will not bounce. It's as good as cash but safer to mail or carry around, especially if the amount is large.

Certified checks are used primarily in situations where a creditor doesn't know or trust a borrower's (or payee's) creditworthiness. Since the check issuer cannot put a stop payment on a certified check, the check holder knows that he or she can get cash out, guaranteed. If you don't have a bank account, most banks will allow you to get a cashier's check in exchange for cash, plus the processing fee. A cashier's check is guaranteed with funds from the bank, is signed by the bank, and is not from your own personal account.

Often, a banking institution may freeze the amount of a certified check in the depositor's account. In other words, you may have $1,000 in your checking account, but if you have obtained a certified check in the amount of $500 and it hasn't been cashed yet, your bank will only allow you to have access to the remaining $500, to avoid a bounced check. So if you check your account balance, you may think you have $1,000 but the bank is reserving the amount to cover the certified check that has been issued.

Most banks do charge a fee for issuing a certified check for their banking customers but some banks will provide it as a free service for their customers. It's definitely not the most convenient method of paying a transaction, but there are many common situations which require a guaranteed payment, and often a certified check is your best option although cashier's checks are becoming more preferred.

In some situations, you may avoid having to use a certified check by paying with cash, or a money order or even paying on credit. Of course, you need to weigh the pros and cons of these other options -- obtaining a money order can also involve surcharges and fees. Paying via credit may save you the hassle of going directly to your bank, but if you don't pay the amount in full when you get your bill, then you'll end up paying interest charges on the transaction. And there are just some situations where a credit card or even debit card will not be accepted for payment.