Advance America: When to Use a Check vs. a Money Order

LOS ANGELES, Feb. 18, 2021 /PRNewswire/ -- Making large payments or transferring substantial sums of money in cash is quite risky. To solve this issue, people can use a check vs money order to send and receive money.

Both of these financial tools are similar in function but have some key differences in uses. Learn more about these nuances below.

Check vs. Money Order: What's the Difference?

Check
A personal check is a slip of paper someone can use to write against their checking account in any amount. In doing so, they can make payments to other people by authorizing the transfer of funds from their account to the destination — without moving around large amounts of cash.

Someone can write a check in any amount up to the amount sitting in their checking account. If they try writing a check for an amount larger than their checking balance, their check will "bounce". That means it will not be processed, and they'll likely incur nonsufficient funds (NSF) fees.

A check's recipient can either cash the check at their bank or deposit it into their checking or savings account.

When someone writes a check, the amount stays in their account until the recipient deposits or cashes it. The amount is then moved from the account to its proper destination.

Banks often give their customers some checks to start. Bank customers can order more checks from their banks as needed.

Additionally, most banks offer e-check capabilities. An e-check lets people pay for things online. They're entirely free to use.

Money Order
A money order is a slip of paper that represents a prepaid amount of cash. People can buy money orders from USPS locations, Advance America locations, grocery stores, convenience stores, and more.

A money order differs from a check in that the buyer pays for it up front with cash. The money is transferred from their possession immediately in exchange for the money order.

Since money orders are paid with cash, the buyer doesn't need a bank account.

Because money orders are prepaid, the funds are guaranteed. That means the recipient's financial institution will honor the money order no matter what. They cannot bounce for nonsufficient funds, unlike checks.

Money order sellers also give the money order buyer a receipt for tracking purposes. If the money order is lost, this receipt can help replace it.

However, money orders come with a small fee. Money orders are limited to $1,000, and the buyer must have the cash on hand to buy.

Cashier's Check
A cashier's check works like a money order, but for payments exceeding $1,000. Cashier's checks cost more and can only be obtained from a bank where the buyer has a bank account.

When to Use a Check
Checks work well for various purposes that don't require as much cash or security around that cash — usually transactions that happen in person.

One of the most widespread personal check uses is gift-giving. Family members can write checks as gifts to children as an easy gift idea.

Bill payment is also a common use of personal checks. Paying the money order fee for every bill every month would add up.

When to Use a Money Order
People should opt for money orders for more important payments that require larger sums of cash. The guarantee on the money order and the ability to replace them ensures that payments go through.

That said, money orders can also be helpful for people sending gifts to relatives over long distances. Once again, the security features protect the payer's money. Money orders don't contain bank information, and the funds are guaranteed.

SOURCE Advance America