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 payor’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.
A cashier’s check or a money order is the preferred mode of receiving payments prior to shipping goods since these guarantee the payee of good funds. The following write-up on money order vs cashiers check examines the similarities and the differences between money order and cashiers check.
Understanding Money Orders and Cashier’s Checks
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 US, Western Union and the United States Postal Service (USPS) are the two major issuers of money orders. A cashier’s check is drawn by a bank on it’s own funds. It is signed by a cashier or by a bank officer.
A money order is prepaid since it is issued by one of the aforementioned entities for the amount that is paid up-front. Hence, the payee is assured of receiving the money. A cashier’s check is also secured since a bank assumes the responsibility of crediting the payee after debiting the payor’s account. The latter’s account is debited the instant the check is issued. In other words, the payor cannot get a cashier’s check if there is a dearth of available funds in the account. Hence, both cashier’s checks and money orders guarantee the payee of receiving a payment.
In addition to the actual amount of cashier’s check or money order, the payor 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.
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 the confirm the amount of the cashier’s check. Money order 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.
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-issued or state-issued picture identification is required. International money orders worth $700 or less can be easily dispatched without much ado. A cashier’s check is always better when one needs to pay/receive a large amount of money. For more on money orders, one may refer to the article ‘what is a money order’.
Hopefully, the above article would have clearly illustrated the difference between money order vs 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.
