Paying With A Credit Card
Cashier's checks and money orders are negotiable instruments that provide the payee with guaranteed funds. People buying these items must pay with cash. Anyone intending to fund the purchase with a credit card must do so by making a cash advance, rather than directly paying for the item with the card. Technically the purchaser pays for the check or money order with cash, as opposed to the credit card, because the cash advance and the purchase are two separate transactions.
Banks normally allow both customers and non-customers to take cash advances if they present a valid form of ID and a major credit card. However, banks are not required to process cash advances in excess of $5,000 for non-customers. Many financial institutions charge a fee for issuing cashier's checks and money orders. Some banks and credit unions only issue these negotiable items to account holders. Purchase rules among other businesses that sell money orders vary from business to business.
Generally, financial companies charges higher rates for cash advances than other types of transactions. Additionally, many firms charge a transaction fee that can amount to 3 percent of the cash advance amount. These fees can make cash advances very costly for consumers. Any fees charged by the bank or business for purchasing a money order or cashier's check are on top of the already significant cash advance fees. People close to their credit limit may also incur over limit fees if the overall total causes them to exceed their account limit.
Cashier's checks are obligations of the bank, as opposed to the person who buys the check. If a bank allows a customer to make a cash advance and then buy a cashier's check, the bank is at risk of a loss if the credit card company disputes the cash advance. This occurs in situations involving identity theft and often results in the bank having to reimburse the account of the victim. In such a situation the bank still has an obligation to honor the cashier's check if another bank presents it for payment.