Difference Between a Certified Bank Check & a Personal Check

You shouldn't accept either type of check from someone you don't trust.

In the 2008 survey "The Evolution of the Check as a Means of Payment," Stephen Quinn and William Roberds note that checks were the most common non-cash payment method in the 20th century in spite of their inefficiency and security problems. Compared with personal checks, certified checks are more efficient but also more likely to be abused by scam artists.

Reliability

In order to cash a personal check, a checking account needs sufficient funds. If the funds are insufficient, the check "bounces," the recipient does not receive money and the bank charges a fee to the customer who wrote the check.

Certified checks are guaranteed to be valid. Both the customer and the bank sign a certified check, which means the bank guarantees the transaction. Such checks are more reliable and efficient than personal checks, and their liquidity is the same as cash.

Security

Certified checks' reputation for reliability has made them a target for scams. Most scams involve presenting the victim with fraudulent certified checks while requesting money and products in return. Typically the victim has already exchanged money for the worthless check by the time banks identify the fraud. According to the Federal Trade Commission, fraudulent certified checks have realistic watermarks and the names and addresses of legitimate financial institutions. Criminals use personal checks for these scams as well, but the false guarantee of certified checks makes them more deceptive.

Liability

The customer who writes a personal check is liable for the amount written on the check. Certified checks make both the customer and the bank liable for the money because the signatures of both parties are on the check. The bank may impose terms on its liability, however, by stating that its certification is valid for only a certain time period. Banks may even cancel their certification if they determine they made a mistake.

History

Certified checks have existed in their current form since 1882, when Congress passed a law requiring fines for banks that illegally certified checks. Before then, banks could certify checks even though sufficient funds weren't present in the account, and so there was little practical difference between a personal check and a certified check.

References

• "Economic Review"; The Evolution of the Check as a Means of Payment; Stephen Quinn and William Roberds; 2008
• "Credit Today"; Certified Check or Cashier's Check; R. Macias and J. Fennelly
• Federal Trade Commission: Giving the Bounce to Counterfeit Check Scams; January 2007
• "A Financial History of the United States"; Jerry W. Markham; 2002