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What is Certified Cheque?

Difference from a normal cheque
Banks enable the financial market to conduct financial transactions using cheques. An account holder in a bank can give a cheque for a particular amount of money present in the bank’s account. The restriction is that the value of cheque must be lesser than the amount present in the account. If the cheque is worth more than the balance in the account then it is termed as “bounced”. Certified cheques whereas can be issued by the customer only when the bank verifies that the specified amount is present in the account.

The bank then transfers the money internally so that the cheque may be redeemed by the bearer or account holder when encashed. These may be considered liquid in financial terms since they will most certainly be converted to cash instantly. Some countries put restriction on these cheques since they might be used as substitute for real money.

Certified cheque in Canada
The federal government of Canada allows the passing of certified cheques for both internal and external businesses. The certified cheques guarantee that the specified amount has been set aside for the person who is entitled to redeem the cheque and get the amount. Almost all banks in Canada including the leading banks support such kinds of cheques. The banks however charge a hefty fee for issuing such cheques.

The certified cheques are valid outside the country in which they are issued. The cheques may be termed as non local cheques by the banks though. These cheques are very valuable during international business from Canada. These cheques ensure that they would be cleared at the earliest so that money can be obtained faster, thereby accelerating business.

Minimum time for clearing
The federal government has stipulated an amount of time before which any certified cheques must be cleared. The stipulation is that a cheque must be cleared within five business days from deposit. The cheque may however be delayed since it may be a non local cheque or the amount of money in the cheque is very large.

The bank however must inform the customer of the delay and clear the cheque at the earliest. The number of days a bank will allow before dishonoring a certified cheque is also limited. The cheque must be redeemed before the time to get the cash. If the time of redeeming is later than this date then the cheque will lose its certified status and be considered as a normal cheque.

Ledger keeping is the key
It is a practice in some Canadian banks to have a Ledger keeper in charge of certified cheques. It is his duty to oversee the check and determine if the customer has enough funds in his account to issue a certified cheque. Once he gives the signature on the cheque, it is given to the customer. The amount will be deducted from the customer’s account. The bank will then be responsible for the payment to the person or account to who the cheque has been written to. Certified cheques ensure that certain financial transactions can be done with better trust regarding the amount.

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