Considering whether or not to accept checks as a valid method of payment?
Certified checks offer a greater degree of security and validation, helping protect your business against fraud.
In this article, we’ll explore what certified checks are, when to use them, and the benefits offered over regular checks, so you can decide whether they’re a good fit for your business.
What is a certified check?
A certified check is a type of personal check that a bank guarantees will be paid. When certifying the check, the bank verifies the account holder’s signature and ensures there are enough funds in the account to cover the amount. It then marks the check as certified, offering more security than a regular personal check by lowering the risk of it bouncing due to insufficient funds.
Like a standard check, it is drawn from either a personal or business account, but with a certified check, the bank confirms that:
- The issuer's account has sufficient funds to cover the check
- The account holder’s signature is valid
The bank then marks the check as certified (usually with a stamp or signature) and earmarks the funds. This gives the recipient confidence that the check won’t bounce, making it a preferred payment method for high-value or sensitive transactions or when dealing with unfamiliar parties.
Once certified, the funds are frozen in the account until the check is cashed or deposited. Key characteristics include:
- Guaranteed funds
- Reduced risk of bounced payments
- Typically stamped or marked by the bank as “certified”
Certified checks are preferred and used in a variety of scenarios, including legal settlements, large contractor payments, purchasing capital assets, and situations in which sellers won’t accept a personal check.
Cashier's check vs certified check: What's the difference?
Both are considered more secure forms of payment than standard checks, but the two differ in how the funds are handled and who guarantees them:
- Certified check: Drawn from the payer’s own account. The bank verifies the funds and signature, then earmarks the amount. The payer is still technically the source of the funds.
- Cashier’s check: Drawn from the bank’s account. The payer provides the bank with funds upfront, and the bank issues a check in its own name. The bank becomes directly responsible for the payment.
So, when should you use one or the other?
If you want extra payment security but still want to use your personal or business account, then you need a certified check.
If, on the other hand, the payee needs to guarantee bank funds or when the transaction amount is especially large, a cashier’s check (sometimes called a bank draft) is a better option. They’re generally considered safer, and they are less prone to fraud or insufficient funds issues.
The process for obtaining either type of check is largely similar
Where to get a cashier’s check or certified check?
In either case, you can obtain these checks from your bank or credit union.
You’ll typically need to visit the branch in person and provide:
- Valid identification
- Sufficient funds in your account (for certified checks)
- The payee’s name and payment amount
How to get a certified check (or cashier’s check)
Getting a certified check is usually a quick process, but you’ll need to visit your bank or credit union and follow a few key steps. Not all banks offer certified checks, so it’s best to check in advance.
You’ll need to:
- Visit a branch in person (in the majority of cases)
- Bring a check filled in with the correct details
- Ask the teller to certify the check (they will guide you through the verification process
- Keep your receipt for tracking later on
You may also need to pay a small fee. This varies by institution but is often between $10 and $20.
Documents needed to obtain a certified check
When you go to the bank to obtain a certified check, make sure to bring with you:
- A valid form of ID (driver’s license, passport, etc.)
- Your checkbook or account details
- The payee’s name and exact payment amount
When to use a certified check?
Certified checks are best used in situations where the recipient needs extra assurance that the funds are available and the payment won’t bounce.
Classic use cases for certified checks include:
- Buying a used car from a private seller
- Making a down payment on a rental property or home
- Paying a large deposit or security bond
- Settling a legal or contractual obligation where proof of payment is important
In the business world, certified checks are more likely to be used for:
- Paying vendors or suppliers for large one-time orders
- Providing a deposit for commercial lease agreements
- Purchasing expensive equipment or vehicles
- Making final payments in mergers or acquisitions
- Placing a bid or earnest money deposit for government or large-scale contracts
- Paying licensing, permitting, or regulatory fees where a secure payment method is required
But certified checks aren’t always the best route forward. In some situations, other secure payment methods might be more appropriate.
Cashier’s checks offer a higher level of security, for instance, and are often preferred for very large transactions. Alternatively, wire transfers or ACH payments might be a better fit for urgent needs or recurring B2B payments.
Understanding the risks of using personal checks
Personal checks are often avoided or not accepted for large or one-time transactions. That’s because they carry with them important risks, which include:
- Insufficient funds and associated fees or delays
- Forgery or alteration
- Lack of guaranteed payment or bank verification
Benefits of using a certified check
Certified checks offer a balance between convenience and security. Broadly speaking, they offer three important benefits.
1. Enhanced security and trustworthiness
Since the bank verifies the account and signature, a certified check gives reassurance to the recipient that the payment will go through.
This verification layer adds trust between parties, essential in transactions with unknown vendors or customers.
2. Guaranteed funds for the recipient
Once a check has been certified, the bank sets aside the funds, which ensures they are available when the check is cashed or deposited.
This essential eliminates the risk of a bounced payment due to insufficient funds, improving security for the recipient.
3. Widely accepted for large or formal transactions
Certified checks are often requested in situations where personal checks aren’t accepted, such as in large business transactions.
That means they are suitable for a wide range of situations, such as legal settlements, real estate deals, or vehicle purchases.
How to guard against certified check fraud
Certified checks are definitely more secure than personal checks, but that doesn’t mean that they are 100% immune to fraud.
Scammers sometimes create counterfeit checks that appear legitimate and certified, but that are in fact fraudulent.
To protect your business against the possibility of fraud, it's good to be aware of these common scams involving certified checks:
- Overpayment scams: A scammer sends a fake certified check for more than the purchase price and asks for the difference to be refunded
- Online marketplace fraud: A buyer offers to pay with a certified check, but the check turns out to be fake
- Phony buyer scams: A buyer sends a forged certified check and arranges to pick up goods quickly, before the check clears
These scams often rely on urgency and trust, two things that should always raise red flags when combined.
Tips to verify the authenticity of a certified check
Whenever you receive a certified check, it's a good idea to implement these three best practices to verify that it is indeed authentic.
1. Check with the bank
Contact the issuing bank directly using publicly listed contact information, not numbers printed on the check.
2. Physically inspect the check
Inspect the check for tampering, such as inconsistent fonts, smudges, or missing security features.
3. Wait for clearance
Before using the funds, wait for full clearance, even if your bank makes the funds available quickly. A check can be reversed if it’s later found to be counterfeit, leaving you out of pocket.
What to do if you suspect fraud?
If you perform the above double-checks and suspect that a certified check is fraudulent, you should:
- Stop the transaction immediately (don’t bank the check)
- Not send any money or goods
- Contact your bank to report the check and get guidance on next steps
- Report the incident to the authorities (the FTC in the U.S.)
- Keep all related communication, including emails or text messages, in case it’s needed for an investigation
Are certified checks right for your business?
Certified checks are a reasonably secure invoice payment method, but they aren’t exactly the most common or the most convenient.
With BILL, you have access to multiple options for B2B payments, including:
- ACH
- Wire transfer
- Card
- International wire payments
- Paper checks
