What is a Certified Cheque and How To Get One in Canada?

While digital payments, credit cards, and wire transfers are taking over the financial world, certain transactions demand more than virtual clicks and swipes. If you purchase large items like a car or a home in Canada, you may be asked to pay with a certified cheque.

A certified cheque is a type of cheque that guarantees there will be enough funds in your account when the recipient cashes the cheque. It assures the seller that your cheque won’t bounce and that payment will be received.

If you’re not familiar with certified cheques, this blog post will enlighten you on how certified cheques work in Canada. We will discuss how to obtain a certified cheque in Canada, associated costs across different banks, and the differences between cashier’s and personal cheques.

What is a Certified Cheque?

A certified cheque is a type of cheque that is properly verified by a bank before receiving its official seal of approval. This seal of approval by the bank signifies that the cheque holds guaranteed funds and won’t bounce when cashed within the designated timeframe.

When you apply for a certified cheque, your bank ensures that your account has enough funds to cover the specified amount. Once this verification is successful, the bank issues the certified cheque, effectively setting aside the required funds in a frozen state.

It’s worth noting that once a certified cheque is issued, the specified funds become temporarily inaccessible for other transactions. This ensures that the funds remain untouched, serving the sole purpose of fulfilling the cheque.

If you need to make a payment using a certified cheque, you may have to visit the bank branch in person. Here, a bank teller will confirm your account ownership and the availability of adequate funds to honour the cheque and place the bank’s certification on the cheque.

The bank’s certification involves a distinct marker, such as a signature or stamp, indicating its endorsement of the cheque’s legitimacy. Usually, the assisting bank teller provides this vital verification, appending their signature as a testament to the cheque’s validity.

However, the bank’s certification comes with certain conditions, like the timeframe during which the cheque remains valid. This period, typically spanning 60 or 90 days, imposes restrictions on withdrawing the funds contributing to the certified cheque.

In addition, depositing a certified cheque has its advantages. Following the deposit, you gain access to the first $5,000 of the deposited amount on a subsequent day, granting you a swift infusion of funds.

How to Get a Certified Cheque in Canada

Obtaining a certified cheque in Canada involves a few straightforward steps that ensure a secure transaction. Follow this guide to simplify the process at your chosen financial institution:

1. Request a Certified Cheque: Firstly, visit your preferred bank branch or credit union and request a certified cheque from the bank teller. The bank teller will check your account to ensure you have the funds for your transaction.

2. Verify Your Identity: When you request for the certified cheque, the bank teller will ask to verify your identity and signature. Ensure that you visit your bank with a valid government-issued ID card, driver’s license, or passport.

3. Fill in the Cheque: When the bank teller processes your cheque, they will give it to you to fill in your information. If you choose, you can fill in your information at the counter.

4. Get Your Cheque Signed by the Bank Teller: After successfully filling in your information, give the cheque to the bank teller, and have them sign it. The bank teller will put a signature or place a stamp on the cheque. This shows that the funds are readily available, and the bank guarantees your funds.

5. Pay the Fees: Keep in mind that some financial institutions charge a nominal fee for providing certified cheques. These fees typically range between $10 to $25. In some cases, account holders may enjoy benefits that waive or reduce these fees, especially if they have an existing bank or savings account with the institution.

Benefits of Certified Cheques

Certified cheques come with several advantages, making them a preferred choice for certain transactions:

Suitable for Significant Transactions: Certified cheques are particularly useful for large purchases or transactions involving substantial amounts of money.
Enhanced Payment Security: A certified cheque offers payment security if you’re dealing with a buyer whose credit score raises concerns. The bank verifies the funds, reducing the risk of bounced payments.
Efficiency in Processing: Obtaining a certified cheque is often quicker than acquiring a draft, making it a convenient option when time is of the essence.

Downsides of Certified Cheques

While certified cheques offer benefits, it’s important to consider their limitations:

Limited Payment Control: Once you issue a certified cheque, you cannot stop or cancel the payment, even if you suspect fraudulent activity. This lack of control can be problematic if the cheque falls into the wrong hands.
High Transaction Charges: Banks typically impose relatively high transaction charges for processing certified cheques. These fees can add up, affecting the overall cost-effectiveness of using this payment method.

What Are Certified Cheques Used For?

Certified bank cheques play a pivotal role in demonstrating your creditworthiness. They are useful when sellers and businesses lack insight into a buyer’s credit reliability and wish to avoid the risks associated with personal cheques.

These specialized cheques are primarily employed for substantial purchases that involve significant sums of money, such as high-value items, cars, or real estate, particularly in transactions exceeding $1,000, where sellers want to avoid a bounced payment.

Despite incurring certain fees, opting for a certified cheque remains a cost-effective choice. Especially when compared to the considerable expense of obtaining a bank’s chequebook, particularly if your cheque usage is minimal.

How Quickly Are Certified Cheque Funds Available?

While a certified cheque is a secured form of payment, the money may take a few days before it appears in the recipient’s account when the cheque is deposited.

However, knowing that the funds from a certified cheque are secured and readily available, the bank may release a portion of the money within one business day.

For most banks in Canada, the first $5,000 can be accessed the next day, and the bank will put a hold on larger amounts.

How Much Does a Certified Cheque Cost?

While some Canadian banks have embraced modern tools like bank drafts and e-transfers, leading to the discontinuation of certified cheque services, certain banks still provide this option, albeit with specific fees.

TD Bank: The Toronto-Dominion Bank charges a fee of $10 when the certified cheque is drawn from the account holder’s account. However, if a certified cheque is requested by someone other than the account holder, the fee is set at $15.
Bank of Montreal (BMO): BMO levies a fee of $15 when the issuer requests a certified cheque. For non-issuers making the request, the fee slightly increases to $25.
Bank of Nova Scotia (ScotiaBank): For individuals with a ScotiaBank account, the charge for requesting a certified cheque is $15. However, for those without an account at ScotiaBank, the fee rises to $25.

Some prominent Canadian banks, including the Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), and National Bank of Canada, have discontinued the issuance of certified cheques. Instead, they suggest considering alternatives such as bank drafts or e-Transfers.

Certified Cheques vs Personal Cheques

A personal cheque lacks the assurance of guaranteed clearance, which is a hallmark of a certified cheque. When you issue a personal cheque, there’s a level of uncertainty about whether the funds will be successfully transferred.

Personal cheques can be conveniently written and issued from various locations, but to get a certified cheque, you must visit a bank or credit union in person, adding an extra layer of verification to ensure its legitimacy.

Another significant difference is the signing requirements. The account holder’s signature is the sole requirement for a personal cheque. However, for certified cheques, the account holder and a bank teller must sign it, adding an additional level of authentication to the transaction.

Furthermore, the handling of funds varies between the two types of cheques. With a certified cheque, the bank institutes a hold on the required funds, ensuring they are reserved for payment. However, when you issue a personal cheque, the payer can access the funds immediately without any reserved hold.

Certified Cheques vs Cashier’s Cheques

Certified cheques and cashier’s cheques share significant similarities. They are secure payment methods for substantial transactions, typically beyond everyday spending. These payment types offer a guarantee of authenticity and reliability.

However, certified cheques are drawn from your personal account, whereas cashier’s cheques are issued directly from the bank’s account. As a result, the bank assumes responsibility should a cashier’s cheque bounce, providing an additional layer of reassurance.

To enhance security, cashier’s cheques incorporate extra measures. These cheques involve multiple bank employee signatures and often feature watermarks. These precautions aim to prevent fraud and ensure the cheque’s legitimacy.

Regarding cost, cashier’s cheques usually come at a higher price than certified cheques. Financial institutions may impose fees of up to $20, depending on the specific institution’s policies.

Certified Cheques vs Bank Drafts

There are only a few differences between bank drafts and certified cheques.

Basis	Bank Draft	Certified Cheque
Key difference	The bank issues a bank draft based on the payer’s request.	Certified cheques are given by customers. The bank teller verifies if the fund needed to make a payment is available, keeps that amount aside (frozen), and signs or certifies that the amount is available.
Issuer	The bank draft is issued to customers on request and the bank transfers the money directly to the bank account.	A customer who has an account in the bank issues a certified cheque and orders the bank to pay the recipient.
Signature	The bank official signs a certified bank draft, making it more secure. It does not need the signature of the customer.	A certified cheque requires the customer’s signature. And the bank certifies a cheque by adding the word ‘certified’ to the signature.
Stop Payment	The best way to stop payment is to lose or destroy the bank draft. However, the bank may provide a replacement issue draft instead.	You cannot stop payment after the certified cheque has been issued.
Security	Bank drafts costs lower than certified cheques.	The certified cheque is guaranteed, and banks charge a higher fee to issue it.

Alternatives To Certified Cheques

Beyond certified cheques, there are various reliable forms of guaranteed payment that you can consider when making a purchase:

Cash Payment: Making direct payments in cash is a straightforward option that instils confidence in the seller. It’s a foolproof way of completing a transaction. However, relying solely on cash might pose logistical challenges for larger purchases.
Money Orders: Money orders serve as an alternative to certified cheques. They are paper-based payments that demonstrate upfront payment for an item. Money orders are commonly used when you need to send money via mail. You don’t need a bank account to buy or cash a money order. Obtaining one from Canada Post costs $7.50. While the funds are guaranteed, there’s a limit of $999.99 for money order payments.
Wire Transfers: Wire transfers provide a cheque-free payment option. These electronic transfers move funds between two bank accounts swiftly and conveniently. Unlike cheques, the funds become immediately accessible in the recipient’s account without any waiting period. As the funds are debited instantly from the sender’s account, there’s no risk of the transfer bouncing.
Payment Apps: Payment apps like PayPal, Google Wallet, and Apple Pay are gaining popularity among Canadians who opt for cashless transactions on their computers and mobile devices. These apps facilitate sending and receiving money globally, enabling electronic spending while shopping online.

Final Thoughts on Certified Cheques

In unravelling the question, “What is a certified cheque?” we’ve embarked on a journey through the world of secure financial transactions.

Whether you’re eyeing a new car, a dream home, or engaging in transactions with unfamiliar parties, the certified cheque is reliable for ensuring your payments are honoured.

So, next time you’re given the opportunity to utilise a certified cheque, remember the assurance it brings – a guarantee that your funds are backed, and your transaction is safe.

Obtain your certified cheque today and experience the reassurance firsthand.

FAQs on Certified Cheques

Are certified cheques safe?

Yes. Certified cheques are the gold standard of security that is less susceptible to fraud. If you are a seller wondering whether or not it is safe to accept a certified cheque, you should know that the funds have already been guaranteed to be available by the bank.

Do certified cheques expire?

Certified cheques do not generally expire. However, it is best to check with your teller when your cheque has been issued. Your bank may stipulate that your certified cheque is valid for specific days.

Can a certified cheque bounce?

No. It should not be possible to have a certified cheque bounce. You can check with your bank if you have concerns about the chances of your cheque bouncing.

What does a certified cheque look like?

A certified cheque carries the name and address of the payee, the payee’s signature, the payment amount, and a stamp or logo from the issuing bank.

Can you cancel a certified cheque?

No. You cannot stop the payment once they have handed over the cheque. The funds are held (frozen) until they’re deposited to the person or institution they’re intended for.