I’ll be the first to admit that I am not terribly familiar with the finance and banking industries. There are a lot of terms that are thrown around that I do not necessarily understand. Given some recent happenings in my life, I got to learn the difference between a few different kinds of “secure” money vehicles, so I thought that I would share these with you today. If you’ve ever wondered what’s the difference between a money order and a certified cheque (certified check), and how those relate to a bank draft, then I’ve got the layman’s response for you.

A money order can be acquired from a number of different locations, including the post office. You do not need to go to a bank to get a money order. All you do is provide the representative with the funds, as well as the name of the recipient, and you will be presented with a money order for that amount. There is always a fee involved, usually a few dollars, for this service. The limitation of a money order is that its value is typically limited to $1,000 or less.

A certified cheque (or certified check, if you prefer) is just like a regular cheque/check from your bank account. You do not need a special form and a certified cheque will largely look like any other cheque. The difference is that you can take your cheque to the bank to get it “certified”. What this means is that the bank guarantees that there are funds in your account to accommodate this cheque, typically setting the money aside so that it cannot be touched. However, many banks do not provide this service anymore.

A bank draft functions in much the same way as both a certified check and a money order in that the money is guaranteed to the recipient. Instead of going to a post office or providing a personal cheque, you get a bank draft by going to your favorite financial institution and providing them with the funds directly. Unlike a money order, there is virtually no limit on the size of a bank draft. Although you do provide the names of the sender and the recipient, you are told to treat the bank draft like cash.

In essence, all three of these things — money order, certified cheque, and bank draft — serve the exact same purpose and come with very similar fees. There are obviously alternatives as well, like the email money transfer, direct deposit, PayPal, and bank wire transfer. The critical elements in all of these are two-fold: first, a record/receipt is provided to the sender and second, the money is guaranteed for the recipient.

Now you know. And knowing is half the battle… you know the rest.