It wasn’t that long ago that writing checks was how you paid for just about everything. But as the shift from “avoid using credit cards to protect your credit score” to “you MUST use credit cards to protect your credit score”, this form of payment has fallen into the sidelines.
Thus it might come as a surprise to learn there are quite a few different types of check out there that still play an important role in money management. Here are the most common kinds of checks and what they’re used for.
Types of Checks
1. Bearer Check
This is a rarely used form of check, as it requires no identification to cash. The check may be a personal, cashier’s, or other form of check. However, instead of the payee’s name, the field is marked “cash”.
This means whomever has possession of the check may cash it without it having to be placed into their account. While convenient, this type is hardly ever used due to the increased risk of theft.
2. Blank Check
Another rare kind of check, a blank check is a personal check in which the issuer leaves the amount field blank. The recipient is then able to write their own amount in and cash the check as normal.
Blank checks are very rare outside of Hollywood movie plots due to the high liability. When given to someone trustworthy for purposes such as grocery shopping, blank checks are a useful tool.
However, the potential for a recipient to write an amount far greater than the issuer can pay is a major risk, making this one of the least commonly used types of check out there.
3. Cashier’s Check
While predominantly issued by banks, you may also obtain cashier’s checks from some locations that offer paycheck cashing. These checks are guaranteed and signed by the cashier or manager.
Banks will deduct the money from your account, while other locations will usually request the money in cash at the time of issuing.
The most common use for cashier’s checks are to pay off loans, although they may be used for other expenses such as bills. Depending upon your region, these checks may also be known as manager’s checks, official checks, or treasurer’s checks.
4. Certified Check
These work in a similar fashion to many prepaid credit cards. They’re used for making major purchases where the risk is too high for a company to accept personal checks.
One good example of this would be purchasing a used car. To obtain a certified check, you must first present a check in the amount to your bank. They then compare the requested amount to your current balance.
If you have enough in your account to cover the check, the bank issues your certified check in the requested amount and that amount is placed on hold to ensure the certified check won’t bounce when cashed.
5. International Money Order
Similar to a regular money order, the international money order is a form of payment which may be issued in other currencies. They’re issued by the post office and are paid for at the time of issuing.
The resulting payment is guaranteed and may be tracked to ensure against loss. In the event a buyer attempts to cash the money order and claim the funds never arrived, the post office is able to dispute and show proof of cashing.
This makes it one of the most reliable forms of payment when purchasing from eBay or other independent seller venues online.
6. Money Order
This special form of check is issued by the US Post Office or places that handle check cashing (including some supermarket chains). The money order is paid for up front and is considered a guaranteed form of payment.
Money orders include a receipt stub, allowing the purchaser to obtain a refund if the money order is lost or not cashed within a certain period of time (usually one year).
7. Personal Check
This is what you normally think of when someone mentions a check. An individual may write a personal check to pay for any number of things, payable only to the person or company named.
These checks are unsecured, meaning they do not guarantee the funds will be available upon cashing. This often leads to the check bouncing, either intentionally or accidentally.
Today, banks usually charge to issue checkbooks and many businesses won’t accept them. Fees of up to $40 may be required for a bounced check from the bank and/or the recipient.
While still the best known type of check, this liability has made the use of personal checks increasingly rare over recent years.
8. Traveler’s Check
Perhaps one of the better known payment methods to those who spend a lot of time visiting other countries, the traveler’s check is a form of insured prepaid check that can be used as a cash equivalent in most hotels or stores.
They may be issued in any currency or denomination. As they are insured, the lost amount will be replaced if these checks are lost, damaged, or stolen. This also makes them safer to use in many circumstances than a credit card.