As the number of hackers, identity thieves and scammers multiplies, so should efforts to protect your checking account. Fraudsters can steal important information found right on the front of your checks, including your bank account number.
Everybody hopes to avoid check fraud. A simple, convenient and inexpensive way to protect your bank information is to use either money orders or certified checks instead of personal checks or debit cards. Deciding when to use a money order or a certified check, however, can be confusing because each has unique benefits.
Before choosing which payment method to use, learn the differences between money orders and certified checks and discover which one is right for your needs.
What is a money order?
A money order is a type of payment that can be used in place of a check or bank draft. You can purchase money orders in the dollar amount you need at many places, including:
- Banks and credit unions
- Convenience stores
- Post offices
- Some retailers
When buying a money order, you pay the total amount of the order up front, plus a small fee that can range from less than a dollar to several dollars. Typically, you can only request money orders up to about $1,000, which makes them useful for buying smaller items or paying bills.
Using money orders is also one way to safeguard your financial information. None of your personal details is listed on a money order.
Typically, you will need to bring a form of identification along with a method of payment for the money order. Cash, debit cards, and credit cards all can be used to pay for the money order, but checks typically are not accepted. Rules vary, however. For instance, the U.S. Postal Service will allow you to pay for your money order using cash, traveler’s checks or a debit card.
Money orders usually can be deposited into bank accounts or cashed at check cashiers or some retailers.
Benefits of Money Orders
- Privacy: Unlike bank drafts, money orders do not contain personal information such as an account number, street address or phone number.
- Easily traceable: More traceable than cash, money orders can be linked back to the payer. This means if you make a purchase with a money order and it is cashed, you can prove you paid for the item.
- Easy to use and inexpensive: Money order purchasers do not need to have a bank account. In addition, you can purchase money orders at many common locations, and they are inexpensive.
- Not subject to overdrafts: Money orders are a good option for those who are trying to keep a watchful eye on their budget or who want to avoid overdrafting a bank account.
What is a certified check?
A certified check is a check issued and backed by a bank. The backing is a guarantee that ensures the account has sufficient funds to cover the full amount of the certified check and that the signature on the check is legitimate.
Banks typically set aside or freeze the amount of the certified check so that, regardless of other banking activity for that account, the check will remain good.
A certified check differs from a cashier’s check, although banks issue both. With a certified check, the bank is merely certifying that the funds are available and the payer has been verified. The money comes out of an individual’s checking account.
A cashier’s check, however, is funded by money transferred from the individual’s checking account to the issuing bank’s escrow account. When the cashier’s check is cashed or deposited by the recipient, the funds are then drawn from the issuing bank’s escrow account.
Certified checks typically are more expensive than money orders, and not all banks offer them. Santander Bank, for example, assesses a $15 fee for a certified check. Cashier’s checks, which are more commonly offered by banks, can cost between $7 and $10.
Benefits of Certified Checks
- Privacy: Like money orders, certified checks do not display information such as your address, bank account or routing number.
- No limits: Big purchases, such as down payments on a house or a car, can be made with a certified check. There’s no limit on the value of the certified check.
- Leave a paper trail: Certified checks also act as receipts because they leave a paper trail, giving the payer proof of payment.
- Extra protection: Certified checks offer an extra level of protection compared to a regular check, as the bank must certify that the funds are available and the identity of the account holder is correct.
Loss, Forgery and Funds Availability Protection
A benefit of using either a money order or certified check is that both can be recovered if they are lost, stolen or destroyed. It is always best to check with the intended recipient — whether a person or business — to make sure money orders or certified checks are acceptable forms of payment before you purchase one.
Although both of these payment methods are great for protecting your privacy, they can be forged. Make sure to send the payment to the right address. You can also hand deliver the payment or let the recipient know when he can expect its arrival. The sooner loss or fraud is reported, the better.
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