One thing we can all agree on is that credit cards cannot solve all your problems. Not all transactions can be made with just a tap, swipe, or click.
While cards and banking online might seem like an easy way to pay for things, you may need a certified cheque for some items.
Though old-schooled, certified cheques are still an effective way to make purchases, especially if you buy something with high value.
If you are buying a high-value item like an artifact at an auction or buying a new car or home and you need to put down a large amount of cash, sellers usually ask for a certified cheque.
The bank verifies a certified cheque, confirming that there are enough funds in your account to cover the cheque. It doesn’t bounce and always gets paid, giving the recipient peace of mind.
This article is the perfect fit if you are unfamiliar with certified cheques. This article covers how certified cheque works in Canada, how to get a certified cheque, how much it costs in different banks, and how they differ from a cashier’s cheque and personal cheque.
What is a Certified Cheque and How Does it Work?
A certified cheque, also called a bank-certified cheque, is a cheque that has been verified by a bank and given the bank’s stamp of approval. It holds guaranteed funds and would not bounce if cashed within the timeframe.
Through the stamp of approval, your bank certifies that you have enough funds in your account to cover the amount of money made for your purchase.
If the funds in your account are in order, the bank will issue you the certified cheque, and the money needed to cover the cheque will be put aside (frozen).
Once a certified cheque is issued, you won’t have access to use the funds for other transactional purposes. Your bank freezes the allocated funds in your account so you don’t accidentally spend the money.
If you must pay for items with a certified cheque, you must visit the bank branch in person. The bank teller will verify that you are the account owner and have funds available in your account to cover the cheque.
The bank certifies your cheque by adding a signature or stamp after verifying that the cheque is good. The cheque is usually signed off by the bank teller who assists you.
The bank takes note of conditions for certification, such as the time frame of the cheque, which is often 60 or 90 days.
During this time frame in which the cheque is valid, the bank prevents you from accessing the money that funded the cheque.
And also, when you deposit a certified cheque, you can access the first $5,000 of the deposit the following day.
Pros and Cons of Certified Cheques
Benefits of Certified Cheques
- It can be used for large purchases or to settle high-value transactions.
- Offers payment security if you are unsure of the buyer’s credit score.
- Getting a certified cheque takes less time than getting a draft.
Downsides of Certified Cheques
- You cannot stop payments even if a scammer gets your cheque.
- The bank charges a high transaction charge on certified cheques.
What Are Certified Cheques Used For?
Certified bank cheques are generally required to prove your creditworthiness. When sellers and businesses are unaware of a buyer’s creditworthiness and do not want to take the risks of personal cheques, they ask for certified cheques.
Certified cheques are mostly used for huge purchases that require lots of money, like a car, high-value items, a house, etc.
A certified cheque is a secured form of payment. When dealing with transactions over $1,000, a seller may request a certified cheque for payment as it protects them from the possibility of a bouncing cheque.
Furthermore, in instances where another payment type is not available, a certified cheque becomes very useful.
Large transactions which may exceed the e-transfer limit, and can’t be completed with cash, may require the intervention of certified cheques.
And although certified cheques come with some fees, it is still more economical than getting a book of cheques from the bank at a huge cost, especially if you plan on doing minimal banking using cheques.
How to Get a Certified Cheque
You must go to the bank branch to get a certified cheque. Confirm that you have enough funds in your account to cover the cheque, and also confirm that the bank you are visiting has a certified chequing service.
You can follow these steps to get your certified cheque from your chosen financial institution.
1. Request a Certified Cheque: Firstly, walk into your chosen bank branch or credit union and request a certified cheque. The bank teller will check your account to ensure you have the funds for your transaction.
2. Verify Your Identity: When you request, the bank teller will ask to verify your identity and signature. You should go to the bank with a valid government-issued ID card, driver’s license, or passport. Doing this will allocate the money specifically for your condition.
3. Fill in the Cheque: When the bank teller processes your cheque, they will give it to you to fill in your information. If you choose, you can fill in your information at the counter.
4. Get Your Cheque Signed by the Bank Teller: After successfully filling in your information, give the cheque to the bank teller, and have them sign it.
The bank teller will put a signature or place a stamp on the cheque. This shows that the funds are readily available, and the bank guarantees your funds.
5. Pay the Fees: Some financial institutions will charge you a small fee for chequing. The fees range from $10 to $25. Some banks give account holder benefits to individuals with a bank or savings account at that institution.
How Quickly are Certified Cheque Funds Available?
While a certified cheque is a secured form of payment, the money may take a few days before it appears in the recipient’s account when the cheque is deposited.
However, knowing that the funds from a certified cheque are secured and readily available, the bank may release a portion of the money within one business day.
For most banks in Canada, the first $5,000 can be accessed the next day, and the bank will put a hold on larger amounts.
How Much Does a Certified Cheque Cost?
TD Bank: Toronto-Dominion Bank charges $10 to the account where the fund will be withdrawn. However, if other persons other than the account holder request a certified cheque, TD Bank charges a fee of $15.
Bank Of Montreal: BMO charges $15 if the certified cheque is requested by the issuer and $25 if the request is made from the non-issuer.
Bank of Nova Scotia: ScotiaBank charges $15 for the payer’s certified cheque request if they have a ScotiaBank account. If they do not have an account with ScotiaBank, the charge is $25.
Some Canadian banks, such as the Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), and National Bank of Canada, have stopped issuing certified cheques. They recommend using bank drafts or e-Transfers.
Certified Cheques vs. Personal Cheque
A personal cheque and a certified cheque are not the same. While it is guaranteed that a certified cheque will clear, it is not guaranteed that a personal cheque will clear.
Personal cheques can be issued from any place where it is written, but a certified cheque must be filled out in person at a bank or credit union.
A personal cheque will only need the signature of the account holder. Certified cheques need the signatures of the account holder and a bank teller.
A certified cheque will require a hold on funds that the bank has instituted, but a personal cheque will not, and the payer can get access to the funds.
Certified Cheques vs. Cashier’s Cheque
Certified cheques and cashier’s cheques have many similarities. Both are used for large transactions and purchases you wouldn’t make daily, and both are guaranteed and secured payment types.
However, while certified cheques are drawn from your account, the cashier’s cheque is removed from the bank’s account. The bank is held responsible if the cheque bounces.
Cashier’s cheques also have some added security measures for safety. The cheque requires the signatures of more bank employees and watermarks.
Compared to certified cheques, cashier’s cheques are usually more expensive. Depending on the financial institution, they come with a fee of up to $20.
Certified Cheques vs. Bank Drafts
There are only a few differences between bank drafts and certified cheques.
The bank issues a bank draft based on the payer’s request.
Certified cheques are given by customers. The bank teller verifies if the fund needed to make a payment is available, keeps that amount aside (frozen), and signs or certifies that the amount is available.
The bank draft is issued to customers on request and the bank transfers the money directly to the bank account.
A customer who has an account in the bank issues a certified cheque and orders the bank to pay the recipient.
The bank official signs a certified bank draft, making it more secure. It does not need the signature of the customer.
A certified cheque requires the customer’s signature. And the bank certifies a cheque by adding the word ‘certified’ to the signature.
The best way to stop payment is to lose or destroy the bank draft. However, the bank may provide a replacement issue draft instead.
You cannot stop payment after the certified cheque has been issued.
Bank drafts costs lower than certified cheques.
The certified cheque is guaranteed, and banks charge a higher fee to issue it.
Alternatives To Certified Cheques
Aside from certified cheques, there are other guaranteed payment forms that you can use when making a purchase.
Paying for items through direct cash is an excellent option that gives the seller confidence in the transaction. It is the most surefire way to make a payment. However, if you want to make payments for large purchases, paying through direct cash might not be the best choice as it can cause a hassle.
2. Money Orders
In place of certified cheques, you can use money orders. Money orders are paper payments showing that you paid for an item in advance, typically used if you want to send money through the mail.
You do not need a bank account to buy or cash a money order. You can get a money order at $7.50 from Canada Post. The funds are guaranteed; however, you can only pay a maximum of $999.99 using a money order.
3. Wire Transfer
You can use the wire transfer payment option if you don’t want to write a cheque. Wire transfers are electronic transfers of funds carried out between two bank accounts. The transfers are fast and convenient.
Unlike cheques, funds are available immediately in the recipient’s account without a hold period. The funds are debited instantly from the sender’s account, so the transfer cannot bounce.
4. Payment Apps
Payment apps like PayPal, Google Wallet, and Apple Pay are becoming popular among Canadians who seek to make cashless transfers and payments on their computer and mobile devices.
With these apps, you can send and receive money from anywhere worldwide and spend money electronically while shopping online.
Final Thoughts on Certified Cheques
One can easily assume that cheques are a thing of the past and do not carry much importance in our current banking world.
This is not so. Certified cheques are still in use today, especially regarding large purchases and secure payments.
Getting to know the workings of a certified cheque is essential. A certified cheque gives peace of mind to both the sender and the recipient because it guarantees a successful transaction.
FAQs on Certified Cheques
Are certified cheques safe?
Yes. Certified cheques are the gold standard of security that is less susceptible to fraud. If you are a seller wondering whether or not it is safe to accept a certified cheque, you should know that the funds have already been guaranteed to be available by the bank.
Do certified cheques expire?
Certified cheques do not generally expire. However, it is best to check with your teller when your cheque has been issued. Your bank may stipulate that your certified cheque is valid for specific days.
Can a certified cheque bounce?
No. It should not be possible to have a certified cheque bounce. You can check with your bank if you have concerns about the chances of your cheque bouncing.
What does a certified cheque look like?
A certified cheque carries the name and address of the payee, the payee’s signature, the payment amount, and a stamp or logo from the issuing bank.
Can you cancel a certified cheque?
No. You cannot stop the payment once they have handed over the cheque. The funds are held (frozen) until they’re deposited to the person or institution they’re intended for.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
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