Cashier's Check - Alternatives and Risks

Alternatives and Risks

Money orders are a popular alternative to cashier's checks and are considered safer than personal bank checks. However, they are generally not recognized as "guaranteed funds" under Reg CC, and are limited to a specified maximum amount ($1,000 or less under U.S. law for domestic postal money orders).

Because of regulatory requirements associated with the Patriot Act and the Bank Secrecy Act due to updated concerns over money laundering, most insurance and brokerage firms will no longer accept money orders as payment for insurance premiums or as deposits into brokerage accounts.

Counterfeit money orders and cashier's checks have been used in certain scams to steal from those who sell their goods online on sites such as eBay and Craigslist. The counterfeit cashier's check scam is a scheme where the victim is sent a cashier's check or money order for payment on an item for sale on the Internet. When the money order is taken to the bank it may not be detected as counterfeit for 10 business days or more, but the bank will deposit the money into the account and state that it has been "verified" or is "clear" in about 24 hours. This gives the victim a false feeling of security that the money order was real, so they proceed with the transaction. When the bank does find that the money order is counterfeit and reverses the account credit many days later, the customer will usually have already mailed the item. In many cases the "check" or "money order" is for more than the amount owed, and the victim is asked to refund the difference in cash.