What's the deal with Cashier's Checks?

This is a question I meant to ask a long time ago but a recent conversation just brought it back to me so I thought I’d ask.

My wife and I were buying a house and the downpayment needed to be in. It was demanded much quicker than we had expected and we weren’t going to be able to get the money out of our investments quickly enough to pay for it. My brother agreed to loan us the money till we got our money out to repay him.

My brother sent me a cashier’s check for the required amount and I hightailed it to the bank to deposit it. Mind you I was under a time crunch as I’d be writing a check for the downpayment the following day. I went to my bank and deposited it when they told me there’d be a 3-7 day waiting period for the check to clear.

WTF is up with that??? I thought a cashier’s check was as good as cash. Essentially the person drawing the cashier’s check has the money withdrawn from their account immediately. The bank is now guaranteeing that the cash amount on the check actually exists and WILL be honored. Why would my bank treat a cashier’s check this way? My brother could have saved himself the trouble and the cost and just written me a regular old check on the basis of this.

Am I missing something?

[sub]FTR I repaid my brother with interest two weeks later.[/sub]

Cashier’s checks can be forged, same as any other, I would expect.

WAG quotient of this answer: 31.4%

A lot of the bank websites I checked said that any check for over $5,000 is subject to being unavailable for longer than normal.

It doesn’t matter what kind of check it was either.

And the accepting bank has to wait for their money for awhile, and perhaps not get it all, if the issuing bank fails before the check clears.

This exact thing has happened to me twice, and in slightly different guises several other times. Riggs bank, in DC, refused to cash my PAYROLL check at the teller window, and it was even a Riggs check! I had to go all the way to a vice-president to find out why, which was it was not their “custom”! #@# Though, I was assured -- IF I filed a signature card at every branch where I might want to cash it -- they would GLADLY honor their OWN CHECK!! %# And the banks don’t trust each other any more than they trust YOU, anymore.

Your best bet to avoid this kind of bullshit is at a small local or regional bank, where the lower level employhees (like tellers) have the autonomy to waive rules like that after a glance at your account history. And almost always SOMEONE in the bank has the authority to waive such rules. Talk to the manager, never raise your voice, never get arguementative – this is a problem to resolve, not something to get angry over. Lay out why you need this, and if you have some history with them they will probably cooperate.

Which begs the question:

What is the point of a cashier’s check, then? Why do they exist?

Next time, just do a direct transfer into your account.

FWIW the bank in question was First Chicago (now Bank One) which is one of the largest banks in Chicago so no small bank help here. I did remain calm and did try to expalin my predicament. When I asked what the hell (I used nicer words) was the point of a cashier’s check the teller just shrugged. I asked for a manger but was told they were unavailable. I really was polite through most of it if clearly getting a bit agitated but I never swore or directly took it out on the teller figuring that behavior didn’t get you very far in a bank except as an appointment with the police.

I left with the check being held deal and wrote a check the following day hoping for the best. As it turned out everything worked fine. I believe my bank would cover a cashed check if you had deposits that indicated you could cover it even if the money was still technically not available (ever see the balance line and available balance line on an ATM receipt…that sort of thing). Whether that policy covered me, the check cleared in time or it just took the people taking my check awhile to cash it I don’t know. Since it all worked out I didn’t feel the need to press the matter further.

Still, as I originally mentioned and robby reiterated what the hell is the point of a cashier’s check anyway unless it’s person-to-person? Ringo mentioned that banks have to wait for their money but I’m not sure that’s correct. I thought that’s what the Federal banking system is for…sort of a bank’s bank. They tell the feds each night what money they think they should collect. The feds tell the bank what money is owed back to the system. The bank either pays up or gets money transferred into its account. If it turns out later that the money didn’t exist (such as a bad check) then the feds take the money back later and it’s up to the bank to track down the bad check writer. In short, these days banks don’t have to wait long at all for their money…certainly not 3-7 days.

At least that’s how I thought it worked…anyone know for sure?

What I meant is that if Bank A accepts a cashier’scheck from Bank B on the day the Feds shut Bank B down, they get in line to get paid whenever that finally happens.

The banks get their money instantly. The laws were written when they had to wait days for the cash. Interest on the float goes to the guy with the most stringent rules. Banks suck.


Next time you are put in this position, cash the check, for cash immediately. A cashiers check is payable to the bearer on demand. After you have the cash in hand, simply deposit it in the appropriate account. I have had run arounds too. If you hold your ground and are patient, the bank has to comply.

Here in our small towns and small banks, it might take awhile for them to acquire the funds necessary to cash a bearer bond. From my experience, banks HATE dealing in cash, so are more than willing to re-issue a check to the closing attorney or the title company.

But I’ll wager ONLY at the bank upon which it’s drawn.

Mole’s brother’s check was almost certainly drawn on a bank from out of state(?).

Actually, a lot of banks are refusing to cash checks without two forms of government-isuued ID. This happened to me at a Chase bank once, where I went to cash my paycheck (it was actually drawn on that branch). The teller suggested I could cash it with my driver’s license and a passport, acknowledging that if I were the type of person who frequently traveled internationally, I likely would not be the kind of person who needed cash on payday. Banks generally don’t want you to get any of their cash unless you have an account with them.

I have run into this problem.

Solution: If you’re getting $7000, ask the person writing the check to send you two checks for $3500 each. You’d think money from such an obvious workaround would also be unavailable, but you’d be wrong.

I guess one of the advantages of a cashiers check was that it would never bounce seeing as the money is already drawn out of Person A’s account before Person B gets to touch the money.

I don’t know if the web site I’m about to post speaks directly to the issue of cashier’s checks or not, but it does shed light on a number of other issues with checks clearing. This is the Federal Reserve.

Yup…my brother drew the check in Phoenix and I’m in Chicago. No that it necessarily makes a difference but the check was drawn from one of the major banks in Arizona (I forget the the name but they’re big).

The work around of two checks sounds good but still a hassle not to mention that you have to pay for two cashier’s checks.

At what amount does a money order stop and a cashier’s check start? Why even bother having two different types of check in this fashion especially if a bank feels they can hold a cashier’s check anyway till it clears?

By the way, your bank was substantially wrong in the way it handled this deposit.

According to the Federal Reserve:
"The following types of deposits must be made available on the first business day following the banking day of deposit (“next-day availability”):
[skipping lines related to Cash, Electronic Payments, US Treasury Checks, USPS Money Orders Federal Reserve Bank and Federal Home Loan Bank checks and State or local government checks]
Cashier’s, certified, or teller’s checks deposited in person to one of your employees and into an account held by a payee of the check. (Note: If the customer desires next-day availability of funds from these checks, you may require use of a special deposit slip.)

Looks to me like they were just flat-out wrong on that. However, reading further down the page we find the following written about exception holds:
Large deposits (greater than $5,000) — Any amount exceeding $5,000 may be held. Your institution must make the first $5,000 of the deposit available for withdrawal according to your availability policy and the remainder within the “reasonable” time frames discussed above.

That being said, yeah, it does seemed darned humorous that if you deposit two $3500 cashier’s checks to resolve your issue, they are bound by federal regulations to provide you with access to those funds 4 days prior to the date they’re obligated to provide them to you otherwise.

I don’t know for sure but I’d wager that even if this happened a cashier’s check would still be honored…especially since the bank isn’t actually paying but rather is holding money taken from a depositor (so it doesn’t count as a bank asset that others may make a claim to). Before investors and creditors get their money back I would think that the Feds would have all outstanding transactions clear the bank before they sealed the accounts. Add to that FDIC insurance to back up depositors and I think there’d be no trouble for the bank to pay even if it was closed down unless the amount being cashed was beyone the FDIC limit ($250,000?). Besides…the chances of a bank failing and another bank being caught out in this fashion are pretty remote and likely a chance most banks are willing to run and just consider it a risk of doing business.

Banks stand to make significant money on the float - the amount of time they have access to your money that they do not.

However, banks also lose significant money to fraud. Unrecognized customers, even if they are from your branch (like me, who never uses a teller), are potential losses. Even worse is when Loss Prevention starts everyone checking out known customers. Some people don’t take well to that - their face recognition is more important than your job (even when you apologize and tell them why you have to do it). [Note, this recollection is nearly 2 decades old when I used to work in retail banking]

Lastly, I’ll address cashing paychecks. Does the branch you are cashing at know both the casher and the writer, regardless of whether the writer is with the same bank. Banks usually charge for payroll check cashing services, and it goes to the branch’s bottom line. Branch managers are under pressure to maximize revenue; offering free services doesn’t do this unless they think they can turn it into business. If they’re not making any money off of you or off of the account [or, from their view, preferably both], then they’re reluctant to provide the service.