4 types of checks you should know about

Understanding how checks work is important, even as technology advances 

Checks have been in use for a long period of time. However, their usage has been dropping every year especially due to advancements in technology and the continued growth of online payments. Today, there are people who struggle with identifying the different types of checks available, something that might end up costing them a good amount of money.

That notwithstanding, check payments are still popular. You might be forced to write a check when buying a house or a car, or even receive one when selling these items. It is, therefore, important for one to know the different types of checks available if they want to make informed decisions when making or receiving payments.

Common Types of Checks

Personal Checks

This is the most common type of check every banking customer knows. Most banks allow their customers to purchase these kinds of checks to use when making payments (some banks offer them for free).

Personal checks come in the form of slips issued by the bank. They contain the account number of the holder as well as the bank’s routing number. The payee, date, signature, and the amount to be paid are left blank. The account holder fills in these details when they are making payments.

When a person makes a payment using a personal check, they fill in the required details, and the payee deposits the check into their account. The money is then transferred into the account of the recipient.

Certified Checks

Just like the personal check above, money for a certified check is transferred from the signatory’s account. However, certified checks are well-trusted forms of checks because the bank guarantees that there are funds available for the payment.

When a person is making a payment using a certified check, they are required to ensure that apart from their signature, they also have a signature from their bank’s representative. The check comes with the word “accepted” or “certified” to guarantee that the payment is available.

Even though these are the best checks to receive payments with, most account holders find them a little bit less convenient to make payments with. This is because they are forced to visit their banks every time they are using them (the checks) for verification and signing.

Cashier’s Check

The cashier’s check is similar to the certified check in that the bank has to verify that there are enough funds to make the payment indicated on the check. However, these two are different. The certified check draws money from the individual account holder while the cashier’s check withdraws funds from the bank itself.

When a person wants to make payment using a cashier’s check, they first make a request to their bank. The bank then checks whether the person has enough money in their account to cover the amount required. If there are enough funds, the bank transfers the money to its own account and then issues the check with the amount and payee’s name already indicated.

It is not possible to get a blank cashier’s check. One should make sure that they know who they are paying and the exact amount of money they would like to pay.

Electronic Check (eCheck)

Electronic checks are a modern version of digital checks that are replacing paper checks. They are among the technology trends driving modern business payments by allowing one to withdraw money from their account and deposit it or rather transfer it into the payee’s account electronically.

These kinds of checks work in the same way as paper checks but are faster. When a person is making a payment using the electronic check, they do not have to manually fill any papers or send any papers to the payee for depositing.

All they need to do is sign into their account, and fill in all the required details with regards to the payment and then authorize the transfer of funds. This saves a lot of time and paper waste compared to the other types of checks.

Conclusion

Even though a bigger percentage of payments are handled digitally today, it is very important for one to know how to differentiate the different types of checks we have. This is because it is common for one to find themselves in situations where they need to issue or receive payment through a check. Understanding the types of checks and the costs associated with them helps in choosing the right check that meets your requirements.