Legal Definition
In the United States, under Article 3 of the Uniform Commercial Code, a cashier's check is effective as a note of the bank. Also, according to Regulation CC (Reg CC) of the Federal Reserve, cashier's checks are recognized as "guaranteed funds" and amounts under $5,000 are not subject to deposit hold, except in the case of new accounts. The length of a hold varies (2 days to 2 weeks) depending on the bank. It is not clear what length of time may pass before a bank can be held responsible for accepting a bad cashier's check.
In Canada, bank drafts do not carry any different legal weight as opposed to a standard check, but are provided as a service to clients as a payment instrument with guaranteed funds. Drafts (or money orders depending on the issuing institution) usually have better security features than standard checks, and as such are often preferred when the receiver is concerned about receiving fraudulent payment instruments. However, bank drafts can also be subject to counterfeiting, and as such can be held or verified by depositing institutions in accordance with their hold funds policy, prior to providing access to the funds.
The term money order is used non-uniformly in Canada, with some institutions offering both money orders and bank drafts depending on the amount, with others only offering one or the other for any amount. Generally, both bank drafts and money orders are treated the same in regards to guaranteed funds and hold policies.
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