Checks are a sort of a formal IOU used to pay money from one party to another. There are different types of checks to be used for specific uses. Check payments are a convenient and safe alternative to making payments by cash, and are commonly used when paying in cash might be risky. Let’s have a look at the different types of checks you can use.
1. Cashier’s check
Banks issue cashier’s checks. The bank makes the promise of payment and not the remitter of the check. Cashier’s checks are guaranteed and are equivalent to cash. This kind of check is generally used for making loan payments to customers or a third party. To get a cashier’s check, the account holder transfers funds from their savings or checking account into the bank’s own account. The next step is for a bank representative to issue the cashier’s check with the bank name and account information and the name of the remitter and the payee. The cheque amount is usually available to the payee by the end of the next business day.
2. Certified check
In the case of certified checks, the funds are directly drawn against the remitter’s personal checking account, with the remitter’s account number and name appearing on the check. In addition to the remitter’s signature, a bank representative also signs the check. The check has the word “certified” or “accepted” printed on it. In the case of a certified check, the bank guarantees the check and may put a hold on the funds until the check clears. People are often confused between a cashier’s check v/s a certified check. However, these are two completely different kinds of checks and cannot be interchangeably used. You can read more on how to get a certified check here.
3. Personal check
Personal checks are the most commonly used type of checks in the United States. Here, the account holder who writes the check is responsible for ensuring that funds to cover the check amount are available in his checking account. If the account is a joint bank account, either account owner can write personal checks against the joint account. Personal checks are helpful for certain transactions such as rent payments or payments to small businesses that do not accept debit or credit cards. One point to keep in mind is that personal checks are payable only to the individual whose name is on the check.
4. Traveler’s Check
Traveler’s checks, at one point in time, were a common way of payment when traveling. These are paper documents for use like cash and standard paper checks. Due to digitized modes of payment, traveler’s checks aren’t currently widely accepted by vendors. But these still remain one of the safest modes of payment when traveling internationally. The advantages of traveler’s checks are that they are generally 100 percent guaranteed by the issuer, and you can replace them within 24 hours practically anywhere in the world.
5. Business checks
A business check is a bank draft that is issued against a business checking account. The payment is made from the organization’s funds and not its owners. There are two types of business checks. The first is a business check used to pay vendors or suppliers for payment towards goods or services related to the business’s daily operations. These checks are drawn on the businesses’ checking account from a general ledger. The second type is a payroll check used by the organization to make payments to employees. The company may have a specific payroll service to create the checks, which are drafted from a secondary business checking account that has been explicitly designated for payroll purposes. The payroll account, in turn, is funded by the business’ general operations account at each payroll period.