Working in a bank for many years, I witnessed frustrated small business owners on the receiving end of bounced checks, which led to delayed business transactions. To avoid this issue, I recommend getting a cashier’s check, especially for large business purchases or vendor payments. Cashier’s checks are bank-guaranteed, fraud-resistant, and reliable compared to personal and business checks.
Understanding cashier’s checks
A cashier’s check is a secure payment method issued by a bank and backed by its own funds, making it safer than personal checks. It includes built-in security features like watermarks and microprinting to reduce fraud risks. Since the bank withdraws the funds immediately from the buyer’s account before issuing the check, it guarantees payment and won’t bounce.
Cashier’s checks are commonly used for large transactions, such as real estate deals, equipment purchases, and contractor payments. They typically clear faster than personal or business checks, often within one business day, though large amounts may be subject to a hold. Fees usually range from $10 to $15, but some banks waive them for premium customers.
Cashier’s checks offer a safe and guaranteed way to make large business payments, but having the right business checking account is just as important. With U.S. Bank’s limited-time business checking promotion, you can unlock up to $900 in bonuses when you open a new account and meet qualifying requirements.
How does a cashier’s check work?
- The customer requests a cashier’s check from their bank.
- The bank withdraws the amount immediately from the customer’s account.
- The bank issues and signs the check, guaranteeing the funds.
- The recipient deposits or cashes the check, and since it’s backed by the bank, funds are typically available faster than a personal check.
When should small businesses use a cashier’s check?
Small businesses should use a cashier’s check when they need to make a secure, guaranteed payment and want to avoid the risks of personal or business checks bouncing. You should get one if you need to make large purchases of equipment or commercial property and have transactions that require proof of payment, like paying security deposits for rental spaces. Additionally, cashier’s checks can help establish trust when working with new vendors.
How to get a cashier’s check for your business
Getting a cashier’s check for your business is a straightforward process, but you typically need a business bank account with the issuing bank. Our list of top small business checking accounts can provide you with the best options.
Here’s how to obtain a cashier’s check:
- Visit your bank or credit union. Most banks require in-person requests, but some allow online or phone requests for cashier’s checks and will mail the check to you or the recipient. Note that banks allowing cashier’s checks for non-customers may charge higher fees.
- Provide the recipient’s name and amount. You can also opt to write a memo. Some businesses add invoice numbers or payment details in the memo field.
- Pay the amount plus any fee (typically $10 to $15). If you have a premium account, some banks may waive the cashier’s check fee.
- Receive the check, which will have security features like watermarks, microprinting, and an official signature by the bank teller or cashier.
- Keep a receipt for your records as proof of payment.
How much is a cashier’s check?
Most banks charge $10 to $15, with some offering free checks for premium business accounts. Credit unions may charge a lower fee. While cashier’s checks can provide security for large transactions, businesses can consider more affordable and convenient alternatives.
Alternatives to cashier’s checks for small businesses
For small businesses, cashier’s checks are great for secure, large transactions, but they’re not always the most convenient or cost-effective option.
Here are some alternatives to consider depending on your needs:
Payment methods | Best for | Fees | Pros | Cons |
|---|---|---|---|---|
Wire transfers | Faster large payments | $15 to $50 | Same-day fund transfers (domestic) and direct bank-to-bank transfers reduce fraud risk | Steep fees |
Automated Clearing House (ACH) transfers | Recurring payments (payroll or supplier payments). | $0 to $3 | Most financial providers provide free ACH transfers | Takes 1 to 3 business days to process |
Business checks | Cost-effective traditional transactions | $0 or low cost | Leaves a paper trail for bookkeeping | High exposure to fraud risk or bounced checks |
Money orders | Small payments | Typically $1 to $5 per money order | Widely available at banks, USPS, and retailers | Usually offers low limits, such as a max of $1,000 |
Business credit/ debit cards | Daily small business expenses | N/A | Faster and easier for daily transactions, and business credit cards can offer perks | Interest charges, if not paid in full |
Which alternative is best for your business?
- For quick large payments → Wire transfer
- For recurring or automated payments → ACH transfer
- For a cheaper alternative for small transactions → Money order
- For traditional method with a paper trail → Business check
- For everyday business expenses → Credit/debit card
Risks and considerations for small businesses using cashier’s checks
Although cashier’s checks are a secure way for small businesses to make payments, you still need to watch out for certain risks and limitations.
1. Fraud and counterfeit risks
Scammers can create fake cashier’s checks that look real. They may pressure businesses to deposit a fake check and send money before it clears. For example, a scammer posing as a new customer may send you a fake cashier’s check for $10,000, then claim they overpaid and request a $3,000 refund. By the time the check is flagged as fake, your business will have lost the refunded amount.
2. Irreversible once issued
Unlike personal or business checks, cashier’s checks cannot be canceled once issued. It’s vital to double-check the payee’s name and the amount before requesting the check. In case you accidentally lost the check, you need to contact the bank.
3. Higher fees compared to other payment methods
Typically, most banks charge $10 to $15 per cashier’s check. To save costs, you can consider other cheaper or free alternatives, such as ACH transfers or business checks. Check out our best free business checking accounts for more information.
4. Slower process compared to digital payments
Many banks require you to visit a branch to get a cashier’s check, and while funds are guaranteed, it may take more than 24 hours to process large amounts. If you want a faster option of sending a payment, you can perform wire transfers.
5. Limited acceptance for international transactions
Cashier’s checks are not always accepted overseas. Some international businesses prefer wire transfers instead of cashier’s checks. As an alternative for global payments, you can choose to pay through SWIFT wire transfers or open business multi-currency accounts.
Best practices for small businesses using cashier’s checks
When using cashier’s checks, small businesses should prioritize security, accuracy, and efficiency.
You need to:
- Verify before accepting a cashier’s check by contacting the issuing bank to confirm its authenticity
- Use a cashier’s check only for large, secure transactions instead of everyday payments to reduce your costs
- Keep receipts and documentation to help track business expenses and resolve potential disputes
- Consider other payment alternatives, such as ACH, wire transfers, or business credit cards, which can be more efficient
Frequently asked questions
A cashier’s check does not expire, but some banks may refuse to cash it after 90 to 180 days due to stale-dated policies. If left uncashed for three to five years, the funds may be turned over to the state as unclaimed property.
There is no set maximum for a cashier’s check, but banks may impose limits or require verification for large amounts, especially over $100,000. Check with your bank for specific policies.
Usually, you must have an account with the issuing bank, but some banks offer cashier’s checks to non-customers for a higher fee. It’s best to check with the bank beforehand to confirm their policy.
Getting a cashier’s check usually takes a few minutes at a bank branch. If you request it online or by mail, processing and delivery may take a few days.
A cashier’s check typically clears within one business day, but for large amounts, banks may place a hold of up to 5 business days for verification.
You must provide the payee’s name, exact amount, and any memo (optional). The bank prints and signs it, guaranteeing funds. Always review the information before finalizing, as changes cannot be made after issuance.
Deposit or cash it at the issuing bank, your bank, or a check-cashing service with a valid photo ID.
Yes, cashier’s checks are generally safe because they are backed by the bank and have guaranteed funds. However, fraud is possible, so to stay safe, always verify before accepting one.
Bottom line
Cashier’s checks offer small businesses a secure way to handle large transactions, minimizing the risks of bounced checks and fraud. However, they come with fees and limited international acceptance. Depending on your business needs, alternatives like wire transfers, ACH payments, and business credit cards may offer more cost-effective and convenient solutions.
