In this article we will see together what are the differences between a bank check and a cashier's check. When making a proposal to purchase a home, a sum is usually required in escrow to guarantee the offer made, and the buyer (often) has never even written a check in his or her life! All the new generations (from millennials onward) are unaccustomed to this mode of payment...
In fact, the only reason for writing a check in the years of digital currencies and online transactions is to write a check. A tool that allows you to "leave an amount on deposit" in the name of a third party, in the hands of an intermediary. This sum serves to demonstrate the seriousness of the expression of interest and to bind (eventually) the parties in case of its acceptance.
Let us look below at the two types of checks, bank and cashier's checks.
Why are there 2 types of checks?
Checks are "securities" or documents that allow the circulation of money without necessarily where to exchange banknotes or currency in general.
The major difference lies in the issuing party. A bank account holder when it comes to a bank check or directly the bank when it comes to a bank draft. While for bank checks, the account holder can issue it at any time by filling it out independently in pen, the latter can only be issued by the bank where the account holder has the availability of the money, and specifically requests the bank to issue it.
How to write a bank check:
By issuing a BANK ACCOUNT, a person, who holds a current account at a credit institution, issues a security by which he "orders" the bank to pay a certain sum that is to be available in his current account.
As you can see in the image shown here, the wording in the document is " At Sight Pay for this bank check, a substantial difference from what we will see later in the cashier's check.
In addition to the place and date of issuance, it is mandatory to specify the sum of money to be transferred, first in figures (top right) then in letters (middle) also the recipient of the sum should be specified and then the signature of the person issuing the check should be affixed.
What is a bank draft
The CIRCULAR CHECK, on the other hand, is a security issued directly by the bank, which, in order to issue it, has already verified and withdrawn from the bank account of the person who requested its issuance, the sum equal to what is requested to be transferred with the bank draft.
As can be seen in the image, the wording has changed, in fact it says "Will pay on demand for this check" meaning that the bank, issuer has obligated itself to pay that amount to the recipient. the other difference between cashier's check and bank check is that the former are printed by the bank, with a special paper, and the information is not handwritten but rather typed. in addition, the check is delivered with a strip of paper to be torn off upon delivery that serves as a "receipt" and summary of the document issued.
Validity of a check:
To be valid, a check must contain certain characteristics such as:
- Date and place of issue
- Amount in numbers and letters of the sum you want to transfer
- References of the bank where the bank account from which the payment is issued is located
- Name of the creditor who will cash the check
- Check number
In the case of BANK ASSIGNMENTS, there is no deadline for which the security "expires."
However, one must be careful about the right of revocation that is granted to the issuer of the document. It is important to know that there is a right on the part of the person who issued the check, to revoke it once the following terms have passed:
- 8 days, if the check was cashed in the same municipality of issuance
- 15 days, should the check be cashed in a municipality other than the issuing municipality
Let me explain further. Titius gives Caius a bank check for €1,000 issued in the city of Verona. After 10 days of payment, Titius goes to the bank and asks to revoke that payment order. If Caius's bank is located in Verona and he collected it before 8 days, Titius's bank will not be able to revoke that payment. If, on the other hand, Caius has not yet cashed the check, he can forget about the €1,000. If, on the other hand, Caius was in another municipality and cashed the check 13 days after it was issued, he would still see his amount paid even though on the eighth day Titius revoked the payment. If Titius does not revoke the payment and there are funds in the account, that check can be cashed even months and months after it was issued.
Unlike the above, for the CIRCULAR CHECK there is no revocability ( with the exception of the return of the security to the bank and the cancellation of the document) this in fact remains valid for up to 3 years after issuance. After this period the beneficiary can no longer collect the amount.
In everyday practice, bank checks are used as "collateral" for payment even their issuance is not always covered by matching funds in the issuer's checking account (which you could not possibly do) Whenever you sign a check you need to be certain that you have matching funds in the account in order to avoid the possibility that cashing it will result in a SIGNIFICANCE.
What happens if I write a check without having the money in the bank.
Should you issue a bank check without having verified the actual availability of funds in your bank, you may face what is known as "bank protest."
Once the check is issued, your creditor goes to the bank to cash it. His bank contacts yours and tells him:
"hey! Your accountant told mine that you have to give me a gazillion €uros. Will you please send it to me?"
Your bank will then respond:
"My client has a balance of 15 cents on his account, wait for me to give him a call."
Before raising a fuss, the bank contacts you and says:
"Listen here Uncle Duck! How come you go around spending and spending when you don't get a penny from me?"
You then can go and deposit your gazillion € you were holding in Switzerland and everyone is happy and content or, you can run for the hills in Mexico and your bank will have to notify your creditor's bank that there might be a "slight" payment problem.
In the latter case, the bank where you tried to cash the check will call your creditor and give him a big two-fer and tell him that the amount you promised him will not be paid. It is at this time that your creditor (rightly displeased) will act in the ways provided by law to protect his reasons.
As a first step, it will need to be legally established that you are going around issuing bad checks; this is done at the protest office, where a public official will verify and attest to your default. The latter will then officially order you to fulfill the payment, if you again decide not to pay then the public official will report your waffling in special public records that can be consulted by everyone, so that people before accepting payments from you have a chance to check whether or not you actually pay...
Reporting in the registry will have several consequences for you:
first, you may have restrictions in your banking relationships ( revoking checkbooks, overdrafts etc ), then forget about having access to loans or financing (even just to get a cell phone). This kind of reporting is not eternal, it can be deleted by following procedures after a certain time interval...but better not to get into it!
