Whether for personal or business purposes, checks play a very important role as a lubricant for the economy. Checks are one of the easiest ways for people to make payments to one another, without the need for carrying around large amounts of cash. In the United States alone, tens of millions of paper checks are printed or issued every day.
As you will quickly discover, checks actually come in many different forms. While the differences between, say, a cashier’s check and a personal check are subtle, they are still very important. Understanding the differences between the many different types of checks in use will make it much easier to determine which check to use on any given occasion.
Unsurprisingly, the check printing and mailing industry is currently thriving. Even in the digital era, there are many different occasions a person or a business might choose to use a check. Physical check printing provides several distinct advantages, including security, professionalism, customization, and easy record keeping (especially when you have check printing software).
In this article, we will discuss six of the common types of checks you are likely to encounter. Even if you have never used these types of checks in the past, understanding the meaning of these terms—and the appropriate uses of each type of check—will still be extremely beneficial.
1. Personal Check
Personal checks can be written by anybody with a checking account, which is why these checks are the most commonly used by individuals and other non-business entities. A personal check is essentially a guarantee, saying, “I have at least XYZ amount of money in my checking account and you are now entitled to withdraw this amount.”
If you write checks promising a greater amount than you have in the bank, the checks might bounce (be rejected) or cause you to overdraft. Overdraft often imposes a fee on the account holder, though many banks offer overdraft protection. Be sure to ask your bank about the types of checks you can issue and about any stipulations that might be affecting your account.
2. Cashier’s Check (Bank Check)
Cashier’s checks are more secure than personal checks because these checks are guaranteed by your bank. They are often used for major purchases, such as the down payment on a mortgage. To secure a cashier’s check, you will need to visit your bank (some banks will issue cashier’s checks for nonmembers, though this is rare).
When going to the bank, be sure to know the (exact) name of the recipient, along with the exact amount of money you’ll need the check to be. The money will be withdrawn directly from your account, meaning there will be no opportunity for an overdraft. Typically, there is a charge of about $5 to $10. A cashier’s check—also known as a bank check—entitles the recipient to (essentially) then withdraw a set amount from the issuer’s bank.
3. Money Order
Money orders are similar to cashier’s checks, but there are a few key differences. The most notable difference between a cashier’s check and money order is that while cashier’s checks come from your bank, money orders can be purchased from many different places. This can include other banks, grocery stores, and many other places that can be accessed by pretty much anybody. Money orders are also usually cheaper to secure than cashier’s checks, however, there is usually a relatively low limit to how large a money order can be (often up to $1,000).
4. Certified Check
A certified check, in a sense, is a combination of a personal check and a cashier’s check. To put it simply, a certified check is a check that the bank has verified to be cashable. To obtain a certified check, you will need to go to your bank—your bank will verify that you have enough money in your account for the check to be cashed. Sometimes, the bank will specifically “lock-in” the funds attached to the check (which might create a difference between your current balance and available balance).
5. Novelty Checks
We’ve all seen game shows where the contestant hits the jackpot and then is presented with a giant check. You’ve also probably wondered, like many people, “is it possible to cash a giant check?”
While it is certainly fun to imagine a person entering a bank with a gargantuan check, these checks are not actually real. Usually, they are crude representations of a real check that the big winner receives off stage. In fact, if you look closely at any of these checks, you’ll be able to spot that neither the routing number nor the account number is real.
6. Electronic Checks
An electronic check is a check that is neither printed nor tangible. These checks, sometimes in the form of ACH/Direct Deposit checks, are issued entirely digitally. As time has gone on, a growing number of people and businesses have shifted to using entirely digital payments. While electronic checks typically cannot be printed and taken to the bank, there are usually systems in place that make it easy to access all funds within a few business days. Another new feature offered by many banks is the ability to scan a check (whether personal or formally issued) and deposit the funds directly into your account.
7. Debit Cards
While debit cards aren’t exactly what comes to mind when someone hears the word “check”, it is important for consumers to recognize that these cards, essentially, allow you to write an instant check whenever you are swiping.
Debit cards are different from credit cards because, like a check, they immediately withdraw from your account. This means that if you do plan to use your debit card to make any purchases, be sure that you have the funds immediately available in your account.
As long as people continue making non-cash purchases, some form of checking will need to exist. There are also many check printing companies that you can check out. Depending on the size of your purchase, the entity you are purchasing as, and the exact thing you are purchasing, using each of these types of checks might be an appropriate option.