What is a Certified Cheque
What You Should Know
- A certified cheque is a guaranteed payment option which provides security for large transactions.
- To get a certified cheque, you need to visit your bank, where the bank teller will verify that you have enough funds in your account for the cheque amount.
- Major banks and credit unions typically charge between $10 and $15 for issuing certified cheques.
- Bank drafts are a popular alternative to certified cheques that may offer faster processing times and lower fees, while other forms of payment include cashier's cheques, money orders with Canada Post, and electronic payments.
What is a Certified Cheque?
A certified cheque is a type of cheque that is guaranteed by the issuing bank. It is a secure way to make payments, as the bank has already verified the funds are available and the cheque will not bounce. This makes it a great option for large payments, such as a down payment on a house or car.
How Does a Certified Cheque Work?
Certified cheques work by providing a guarantee from the financial institution that the cheque is valid and the funds are available. A hold is placed on the funds in the account, ensuring that they will be available for payment.
Once the cheque is cashed or deposited, the hold is released, and the funds are transferred to the recipient. This provides an extra layer of security for both the buyer and the recipient.
Certified cheques look similar to regular personal cheques but have a stamp from the financial institution certifying that the cheque is valid.
How to Get a Certified Cheque
To get a certified cheque, you will need to visit your bank or financial institution. A bank teller will assist you in filling out the necessary information and will verify that you have enough funds in your account for the amount of your cheque. Once the cheque is issued, it will be stamped by the bank, certifying that it is a certified cheque.
Once issued, the funds are held by the bank or financial institution. You won’t be able to access these funds. For example, if you have a certified cheque for $10,000 issued, the bank will withdraw $10,000 from your account and hold it until the cheque recipient cashes the cheque.
They will then guarantee the payment of the cheque when it is presented for payment.
Banks charge a fee for issuing certified cheques that typically range from $10 to $15 each. There’s usually no extra fee for depositing a certified cheque outside of any transaction fees charged by your chequing account.
Alternatives to Certified Cheques
Bank drafts are an increasingly popular alternative to certified cheques. Like certified cheques, bank drafts are a form of guaranteed payment that is backed by the issuing financial institution. However, they may offer additional benefits such as faster processing times and lower fees. Some banks, such as RBC and CIBC, have even entirely stopped offering certified cheques in favour of bank drafts.
Other alternative forms of payment include cashier's cheques, money orders with Canada Post, and electronic payments such as wire transfers.
While banks may have their own policies regarding certified cheque expiration, in general, a certified cheque does not expire. That’s different from personal cheques, which usually expire after six months, which is called being stale-dated.
If for some reason, the certified cheque needs to be cancelled, you will need to have it returned to the issuing bank.
To cash a certified cheque, the recipient can simply bring it to their bank and deposit or cash it like a regular cheque. The bank will verify the funds are available and may place a hold on the funds until the cheque clears.
Certified cheques can also be deposited through an ATM or your bank’s mobile banking app.
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