How does a cashier's check differ from a personal check?

A cashier's check is guaranteed by the bank, which means that when a cashier's check is issued, the bank takes the funds from the purchaser’s account and backs the check with its own funds. This guarantees that the check will not bounce due to insufficient funds, thereby providing a higher level of security to the payee. This contrasts with a personal check, which is dependent on the account holder's available balance and could potentially bounce if there are not enough funds.

The assurance that comes with a cashier's check is particularly valued in transactions where the recipient requires a reliable payment method, such as in real estate purchases or large transactions. Since the bank is the one that issues and endorses the check, this mitigates the risk associated with personal checks, where there is always a chance that the check could be invalid due to insufficient funds or account issues.

Other options misrepresent the characteristics of a cashier’s check. For instance, a cashier's check is indeed a secured form of payment, not unsecured. It also has no set limit on the amount it can represent, as it can be issued for large sums based on the payer's needs and bank policies. Additionally, cashier's checks are not restricted to business use; they can be utilized for personal transactions