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Checks vs. Money Orders

What is the difference between using a checking account and using money orders to pay for bills or other items? Simply put, cost, safety and convenience. First of all, let’s define what we are talking about.

What is a Checking Account?

A checking account is a type of transaction account that provides individuals with the ability to use checks and other automated or remote ways to access funds. Deposits and withdrawals are granted in accordance with federal and state regulations as well as the relationship the individual has with the financial institution.

Features and Benefits of Checking Accounts

Checking accounts have many features and benefits associated with them. Below is a list of the features with benefits.

  • Unlimited check writing and no per-check charges (at most financial institutions). Provides you with a worry-free account and saves money at the same time.
  • May earn interest while permitting immediate access to funds. Helps savings to grow faster to achieve financial goals and doesn't require money to be tied up for any period of time to earn interest.
  • Low or no monthly fee. You can save money by not having to pay a monthly fee based on your balance and/or relationship (e.g., direct deposit) with a financial institution.
  • Access funds using the telephone teller system, an ATM/debit card or online banking service. You will have convenient access to funds anytime, 365 days a year.
  • Receive a monthly statement. You will have the safety and security of reviewing transactions on your account on a regular basis.
  • Overdraft protection available through either a savings account or line of credit. You can experience peace of mind in knowing checks will be cleared with funds provided by a savings account or line of credit.
  • Automatic deposit available through payroll deduction or direct deposit. You can access your checking funds quickly and easily by using direct deposit or payroll deduction on a regular basis.
  • Funds are federally insured to $250,000. You will experience the safety and security of knowing your funds are covered by insurance no matter the circumstance.

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What is a Money Order?

A money order is a check purchased by an individual that provides a safe and secure method for delivering money; guaranteeing funds to the payee. Let’s take a look at the features and benefits of this product.

Features and Benefits of Money Orders

Money orders have many features and benefits associated with them. Below is a list of the features with benefits.

  • The money order is purchased with cash. Maintains confidentiality of your account and guarantees payment to the payee.
  • A legal form of alternative payment. Provides you with a safe method of paying for goods or services where a personal check is not acceptable.
  • You will receive a duplicate copy to maintain record keeping. There is peace of mind in knowing that you have a record of the purchase of the money order.
  • Money orders may be purchased up to a maximum, designated amount. You can access as much as necessary in your checking account at your financial institution, or you can use cash to pay for them.
  • There are fees for each money order purchased. Fees are nominal and will usually be attached directly to the transaction.
  • Money orders can be purchased 24/7 at some places. For emergencies, money orders can be purchased at some 24 hour stores.

Advantages of Using Checks vs. Money Orders

While money orders serve an important purpose when checks cannot be used (e.g., paying parking tickets), they are not ideal in terms of paying for everyday expenses. What are the advantages of using checks instead of money orders? Let’s take a look.

Advantage #1: Proof of Payment
Paying with a check allows proof of payment. For example, if you have paid a bill with a check, it is cleared through your financial institution, and there is a record of that payment you can access. Furthermore, you can obtain cancelled checks for proof of payment if necessary.

Advantage #2: Cheaper to Use
Checks are cheaper to use. On average, you will pay approximately $20-$35 for a box of 150 checks, or approximately $.13 to $.23 per check. The cost of using a money order can range from $1 to $5 per check. Let’s say you spend $20 on a box of 150 checks (or $.13 per check). If you pay five bills using those checks per month, you will spend approximately $7.80 for the cost of using the checks. If you pay the same five bills using money orders ($1 per money order), you will spend approximately $60 for use of the money orders. Using checks in this scenario saves you approximately $52.20 per year.

Advantage #3: Safer to Use
Checks are safer to use. Not only do checks allow for proof of payment, they are not considered cash until they are used. So, if you have purchased something and you decide you do not trust the merchandise, or you would like to change your mind, you can stop the transaction by placing a “stop payment” on the check. You cannot change your mind once you use a money order; it is just like cash.

Advantage #4: Recovery When Lost or Stolen
Carrying around a checkbook or debit card is safer than carrying around money orders. If you lose your checks or debit card, you can call your financial institution and report them missing. They will work with you in replacing them and dealing with any fraudulent charges that may occur in the interim. If you drop a $20 money order, that money is gone. If someone steals your money order, that money is gone.

Advantage #5: 24/7 Access to Funds
You can access your checks and your checking account 24/7. You can access your checking account using debit and ATM cards, or online banking, 24 hours a day, seven days a week. With a checking account, you can also “autopay” your bills and save hundreds a year in postage and late fees. Additionally, because you carry your checks with you (or you may have them at home), you will have immediate access to them to make payments on demand.

Advantage #6: Overdraft Available
Checking has overdraft (if you request it) available for emergencies. If you are in need of funds, but you know you do not have enough available in your checking account, you can write the check knowing that your overdraft line of credit will cover the difference. If you do not have the funds when you need a money order, you are out of luck.

Again, there are times when you will be required to pay with a money order instead of a check. If that is the case, purchase your money order with your checking account at your financial institution; it will be cheaper than using a cash center in your community.

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