Five common types of checks

Quick insights

• There are several different types of checks that are suitable for payments.
• Each type of check can have several different uses.
• Some types of checks, such as personal checks, are more common choices than others for various situations.

Checks that you can write yourself or get from a financial institution aren’t relics from the past. In many situations, checks are still an important and popular form of payment. Below are five common types of checks and their conventional uses.

Personal checks

A personal check is a paper slip issued by a financial institution, completed by the account holder. The money is paid directly from the linked checking account when the check is cashed or deposited.

Certain information is preprinted on personal checks: the account holder’s name, address, plus the account and routing numbers. To write a personal check, you add the payee’s name, payment amount and your signature.

A personal check can bounce if the payee tries to cash or deposit it when there is not enough money in the issuer’s account. The recipient probably won’t receive the money from the check, and the issuing bank could charge the account holder a fee.

When personal checks are used

• Certain bills, such as rent and utilities
• Peer-to-peer payments
• Gifts

Cashier’s checks

Cashier’s checks are issued and paid by a financial institution. When the account holder requests the check, the money is debited from their account, then the check is printed and signed by a bank representative. This process guarantees payment to the check’s recipient, who can rest assured that the money will clear.

When cashier’s checks are used

• Down payments for various assets
• Renovations
• International payments
• Legal settlements

Certified checks

A certified check guarantees payment and has a financial institution’s official stamp to prove it. The money to pay the check is drawn from a linked checking account at the time the check is cashed or deposited. However, the bank sets aside money in that account when the check is issued and certified. As a result, you can use an account normally until the certified check is paid without a risk of it bouncing.

When certified checks are used

• Large purchases
• Down payments for various assets
• Government transactions

Electronic checks (eChecks)

An eCheck is essentially a digital rendering of personal check that is processed electronically. Money is drawn from the issuer’s account, but the electronic transaction process is sometimes quicker and more secure than that of paper checks. This is because an eCheck payment is an encrypted electronic transaction processed through the automated clearing house (ACH) network.

When eChecks are used

• Online bills
• eCommerce
• Invoices
• Donations
• Tax payments
• Payroll

Business checks

A business check is a standard check, but for a business bank account, as opposed to a personal account. Just like checks written from personal checking accounts, business checks can bounce if the account has insufficient funds. However, this is a common type of check to use in several business contexts.

When business checks are used

• Payroll checks
• Vendor payments or invoices
• Assorted business purchases

In conclusion

Checks serve a variety of important purposes, and each option offers a level of convenience and security. Personal and business checks are versatile, but you may need an option that guarantees payment, such as a certified or cashier’s check. Understanding the different types can help you decide which is best for your situation.