Money Order Vs. Cashier's Check

Money Order Vs. Cashier's Check

A cashier's check or a money order are preferred modes of receiving payments prior to shipping goods, since these guarantee the payee of good funds. The following article explores the similarities and the differences between money orders and cashier's checks.
WealthHow Staff
Man writing a check
A payee may choose to receive payments via a check, a money order, or a promissory note. Accepting a personal check in lieu of payment, is not prudent, since a personal check is drawn on a depository institution by an individual against his/her own funds that may not be sufficient to cover the amount due to the payee. This is because the payer's account does not get debited for several business days after the check is issued. Hence, people may float checks that may bounce and one may not receive the amount that is due.
The Similarities
Though differences exist between a cashier's check and a money order, common grounds, too, are shared by the two potent financial instruments. After all, understanding the similarities serves to be a prerequisite to gauge the differences between the components in question.
☛ To begin with, the U.S. Federal Reserve declares both -- cashier's check and money order -- as valid options, through which a consumer is entitled to make or demand payment.
Money In Envelope
☛ A money order is prepaid, since it is issued by one of the aforementioned entities for the amount that is paid upfront. Hence, the payee is assured of receiving the money.
Close-up of a pen and check book on top of dollar bills
☛A cashier's check is also secured, since a bank assumes the responsibility of crediting the payee after debiting the payer's account. The latter's account is debited the instant the check is issued. In other words, the payer cannot get a cashier's check, if there is a dearth of available funds in the account. Hence, both guarantee the payee of receiving a payment.
☛ Where security is considered, both share the pedestal of being trustworthy, when compared to personal checks. A consumer may not be very comfortable when accepting personal checks from lesser-known entities. Thus, an individual has the right to choose one of the alternatives to avoid purging doubts and uncertainties.
☛ A cashier's check and money order demand complete payment. The one who is authorized to sell these financial mediums of payment, charges a sum in lieu of the purchase made. The fee demanded is subject to vary across institutions.
☛ The cashier's check and money order, when exchanged for payment, may take ten business days to be declared clear and passed.
☛ One must be careful, when dealing with these two forms of financial tools as both have the tendency to be forged. However, by taking certain precautions, such as conducting a check number verification and demanding a proof of identity, can save time and toil.
The Differences
☛ A money order is a financial instrument that can be issued by a bank, a post office, a grocery store, or even a convenience store. In the U.S., Western Union and the United States Postal Service (USPS) are the two major issuers. A cashier's check is drawn by a bank on its own funds. It is signed by a cashier, or by a bank officer.
☛ In addition to the actual amount of cashier's check or money order, the payer is required to pay a fee to the issuer. However, a cashier's check entails payment of a greater fee as against a money order that can be obtained for a much smaller fee.
Its All for You
☛ A person, who does not have a checking account or a savings account cannot write checks. Hence, such people rely on money orders for making the desired payment.
☛ The payee can verify the authenticity of a money order or a cashier's check without much difficulty by contacting the issuer. One can easily contact the bank and verify the check number and confirm the amount of the cashier's check. Issuers, like USPS have provided tips on their website for verifying the authenticity of a money order.
☛ Although money orders seem to work as well as cashier's checks, they are not recognized as guaranteed funds under Reg CC that deals with the availability of funds and collection of checks. Still, they are preferred to personal checks.
Envelope and money
☛ Money orders are suitable for amounts not exceeding $1000. For money order purchases of $3,000 or more in a single day, a current government- or state-issued picture identification is required. International money orders worth $700 or less, can be easily dispatched without much ado.
Businessman Giving Cheque
A cashier's check is always better, when one needs to pay/receive a large amount of money.
Hopefully, the above article would have clearly illustrated the difference between money order and cashiers checks. Buyers and sellers can always explore escrow services, since these assure the buyer of receiving goods before the seller is paid, while protecting the latter from credit card and payment fraud.