“How to fill out a personal check” is one of the most-Googled money questions—likely because we make so many payments online now. Overall usage of checks drops by 3% each year, estimates the Federal Reserve.
To complicate matters, there are various types of checks beyond the paper kind collecting dust in your desk drawer. You may not encounter them often, but knowing about them can help you protect yourself when you’re buying a home, for example, or selling your old car.
“Different checks are used as the dollar amount increases and the level of trust between two people is less certain,” explains Steve Kenneally, senior vice president of payments at the American Bankers Association. “If you are buying a car from someone you’ve never met, chances are they won’t take a personal check from you.”
Here’s what you need to know about five types of checks beyond personal checks and when you might encounter them.
This secure payment used to make significant purchases might be called a cashier’s check, bank check, or official check, depending on the financial institution. It requires a teller to withdraw funds from your personal account and cut a check from the bank to pay the receiver on your behalf, says Kenneally. The bank is guaranteeing payment.
It's less risky than a personal check. When you use a personal check, the money comes directly from your account, so if it turns out you don’t actually have enough funds to cover what you owe, the recipient could be out of luck. A cashier’s check, on the other hand, won’t bounce.
Usually it isn’t free, either. Fees can vary depending on which bank you use, what kind of account you have, and the size of the check. TD Bank, for example, charges $8 for an official check.
A certified check is a type of personal check that the bank guarantees. At the time you write the check, the bank verifies you have enough money in your account to cover it—and may place a hold on those funds until the check clears. The check typically has “certified” stamped or printed on it. Fees vary depending on which bank you use and the size of the check.
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Money orders are prepaid paper certificates that function like a check: The listed recipient can deposit or cash them.
One big advantage of money orders is that you can buy them at lots of different places, including post offices and grocery stores as well as banks and credit unions. That convenience makes them a good option for people who don’t use bank accounts, or who don’t have access to a nearby branch of their preferred bank. Money orders are guaranteed—you’re handing over cash for the clerk to process—and they never expire, Kenneally says.
Issuers cap money orders, often at $1,000, so you may need to purchase several to cover a large transaction. Fees can vary, too. USPS, for example, has fees from $1.25 to $1.70, depending on how much money you’re handling.
An electronic check, or e-check, is a digital version of a paper personal check issued through your bank. You can often set up automatic payments using e-checks so you don’t have to remember to write out paper checks for recurring bills like your rent or mortgage.
While they look good in pictures, those giant checks you see lottery and contest winners holding are just props. You can’t cash them. Lottery winners typically receive their actual money through wire transfers, says attorney Jason Kurland, a partner at New York-based law firm Rivkin Radler who’s also known as the Lottery Lawyer.
“You can walk around with a big check, but [a bank] will not deposit it,” he says. “They would freak out.”