What You Should Know Before You Use a Cashier's Check

I've heard for years that a cashier's check is as good as cash but even better. After all, it lumps a large sum of money into one note. It is easier to carry than cash. If you are the recipient of a payment, a cashier's check has all the safety of a cash payment but none of the risk of taking cash to the bank for deposit. I found out the hard way that in some cases, this is completely wrong.

I advertised a pickup on craigslist and it was worth about $4500.00, so not bad money. I got several calls right away since I was only asking $4200 so I could use the money to quickly buy a smaller car and save on gas. I had recently taken a job that required much commuting and the pickup was killing me, but I had clear title to it so I figured it would be easy to sell. I was right about that. The pickup was in excellent shape and had only 55,000 miles on it, so the only thing to drive the price down a bit was that it was a work truck with no frills. I had it checked out by my usual mechanic, had the oil changed, rotated the tires, and put the ad out there.

The first gentleman to show up clearly wanted the pickup. He had his own business and he needed an inexpensive truck to haul items for work. He drove it and loved it and had a friend check it for mechanical issues. The friend deemed it a good deal. He offered $3800.00 for it and I said no. I just wasn't going to part with it for that and I needed to buy another car immediately to get to work the next day, so I wanted a good amount to buy with. After some pondering, a second drive, and a second look at the engine he offered me $4000.00. I accepted it and he proceeded to pull out his checkbook. I explained that I could not take a personal check because it would not clear our banks quickly, plus I needed to be sure the check was good before letting go of my beloved truck. The gentleman said that he didn't want to carry that kind of cash, but that he'd go to his bank for a cashier's check. I agreed. As long as he could have it by five the truck was his, but otherwise I had a waiting list a mile long.

At five he returned and handed me a cashier's check for $4000.00 and it had been made out by a major international bank so this appeared to be a no-problem deal. I signed over the title and rushed to my bank which had a branch that was open until six. The sellers of the car that I wanted to buy were waiting for me at their home. I cashed the check and took out $3900.00 in cash and rushed to the seller's location. We made our deal quickly and I now had a nice older car with a clear title. All was well. Or, so I thought.

The next day I was thrilled to be cruising in a teal-blue car that was new to me and I went to the grocery store. I gathered a few groceries and went to the checkout where I used my debit card. It was denied. I explained to the cashier that I was positive there was money in my account and she ran it again. It was again denied. I left my groceries and went to my car, embarrassed at a situation that hadn't happened to me since college days. I quickly logged onto the bank site and checked my account. My heart dropped into my toes. I was overdrawn by over three thousand dollars plus overdraft fees. The cashier's check that I had cashed the day before supposedly hadn't ever even been deposited into my checking account, but it was clear to me that there had to be a connection. I called my bank.

After a few tries I got a manager on the phone. He explained that when you cash any kind of check at the bank and you have an account there, even if the check is not deposited, it will be deducted from your checking account if something goes wrong with the cashed check. I explained to him that it was impossible that something went wrong because the check I had cashed was a cashier's check. He pondered that. He admitted surprise and said that his computer didn't tell him anything except that my account had been debited at 10:12AM and that it was done electronically, so it wasn't from an outstanding check I had written or withdrawn cash. It had to be related to the cashier's check. His next thought was that the cashier's check had been forged and when it had been proven counterfeit, it had been pulled.

Of course, I had assumed I was doubly safe from any kind of forgery since I knew exactly where my truck buyer worked and it was his own business, so it wasn't like he could disappear easily. So, next I called his bank. I had made a photocopy of the cashier's check and I read them every detail. Again, I bounced from person to person until I reached a supervisor. This person told me that the check had indeed been valid, but that it had a stop-order. I explained that my own bank had said that one could not stop payment on a cashier's check since it was "as good as cash." The man said that this was normally true, except that in this case the man who had written the check had called the bank within an hour of obtaining it and reported that it had been stolen from him. In this case, they put a freeze on it. I told him that I had sold the gentleman a vehicle on which I could prove a title transfer and asked them what they needed to show that the check was legitimately written to me. He said that this was not a matter for the bank, but that I could take the man to civil court.

Next stop- call the truck buyer. Amazingly I got him on the phone quickly. I guess he knew that since I knew where his business was he couldn't avoid me forever. He told me that he had really wanted to pay $3800.00 for the truck and since I refused and took his $4000.00, I basically stole his money. I was in completely shock. Was this guy for real?

"So," I said, "you told the bank that the check was stolen?"

"Yes," he admitted. It was the only way he could think of to keep the truck for the amount he preferred to pay for it, but he would happily give me the $3800.00 if I wanted to drive thirty miles to his business place and accept the money. I was furious. I told him that there was no chance of this and that you cannot claim someone has stolen your money when you just don't like the deal you made. Furthermore, the truck was great and I would have just taken it back, but I had already purchased a car and now could not afford the loss. I told him that his own bank had suggested that I sue him. He seemed a little worried, but not too much. He said that he was not from the United States and he wasn't too clear on our laws, but that he did know that lawyers cost more than two hundred dollars and that I'd really do better to take his kind offer and cut my losses. I thought I was going to scream. Even if I had considered this (which I did not) I wasn't anymore just out the original amount, but now the bounce fees. I hung up.

He was actually right that your average lawyer will want at least a retainer, though he probably did not understand that I could probably win a judgment against him for the value of the truck, the bounce fees, and court costs. Still, it would take time and there was always a chance of something going wrong. So, I called the police. In this case I finally got a lucky break at that point. The police officer who took my statement was very sympathetic. He explained that this was a sticky case and that it would probably be better to actually sue the man. But, he also understood that I was in an immediate bind. He offered to call the man and reason with him. I gratefully accepted.

I am not sure what the officer told the guy, but I received a phone call from the buyer with words of apology and something mumbled about jail. Then the cop called to say that if I could meet him at the man's business in two hours, I would be paid in cash. Bottom line- we met, the man paid for my loss plus my overdraft fees and that was the end of it. Plus, one cop got a care package of chocolate-chip cookies. I think that I lucked out in this case and could have been forced to go into a knock-down drag-out court fight. I share this with you because of some valuable lessons that I learned. In most cases and with most banks who would take quite a bit of caution before making assumptions, a cashier's check is still probably fine. It is NOT the same as cash however, and in a round about way, it can be stopped. If you are working on a transaction with an amount of money that is a lot to you and you don't have a civil lawyer in your pocket, I'd suggest making some specific contractual arrangements and going with cold cash.