Bank notes technically include Federal Reserve notes but the term is often used to refer to the negotiable notes formerly printed and circulated by banks. IIRC, they were driven out of existence by a federal law taxing them. Cashier’s checks are instruments issued by banks payable to the bearer for a certain amount. So what legally makes them different?
A cashier’s check has a payee, and can only be redeemed with the payee’s endorsement. Bank notes were bearer notes, offered in round denominations and redeemable by anybody, so they could circulate freely.
Notes issued by state-chartered banks were taxed out of existence during the Civil War. Note issue by private federally-chartered banks continued freely until 1913, then was restricted when Congress created the Federal Reserve, and discontinued altogether by the 1930’s.
But what about a cashier’s check payable to “bearer” for a round amount? I would hypothesize that one could, in theory, get one of these from a bank and transfer it by hand, but I would think you would face stiff resistance in getting it accepted and I question the economic utility of this.
I have, in my life, created a bearer instrument (wrote “bearer” in the pay to the order of line), though it was a personal check I was writing to drop off into a fundraising basket and I didn’t know the formal name to make it out to. It did just fine and I got notice that they got it, thanks, and my bank processed it.
That federal law doesn’t apply outside the US. There are still jurisdictions in which bank notes are issued and widely circulated by private banks. Scotland and Northern Ireland spring to mind—there are at least a half dozen private banks there printing British pounds. Each bank’s notes has a distinctive design. The notes aren’t legal tender, but are the de facto standard currency in their respective countries, and are even commonly accepted in England and Wales.
By the way, I asked a similar question a few years ago here. Here’s the thread: Banknotes vs. (certified) cheques
I’ve written thousands of them, as prize money for winners in horse show classes. The winners had no problems depositing them in their bank accounts. And our bank had no problems processing them. (The only real issue was that there were always a few people who lost these somewhere in their show trunks, and wouldn’t find them until the first show the next spring. So there would be some of them suddenly showing up against the account several months later. Not much of a problem. Plus there were always quite a few that were never cashed at all – in effect, a contribution to the show.)
How could you know whether they were ever cashed; cashier’s checks are removed from the payer’s account upon creation of the check?
I won’t pretend that my experiences are the law, but when I worked in a bank we were expressly forbidden from creating cashiers/official checks with no name, or payable to “cash” or “bearer.” They needed to have a person or business’ name.
If I recall correctly from my time in banking (and I am not at all sure that I do), when I wrote out a cashier’s check for a customer, the funds would be moved from the customer’s account to a specific account of the bank’s created fro such purposes. If the CC was not cashed by a given date, the money would be returned to the original account.
Probably this is easily explained by distinguishing between commercial law, which generally does not prohibit such checks, and your bank’s policy, which evidently did.
That makes sense. Anyone know what happens if you buy them with cash? Perhaps the transaction always requires verifying the purchasers identity (I know you absolutely need to if >$3000 cash).
Possibly, hence my disclaimer. The internet isn’t being so helpful right now but here and here suggest you do need a payee name (I know, WikiAnswers might not be the most definitive cite).