You’re likely comfortable and familiar with the payment methods you use most, like cash or a credit card — but what about when you need a secured form of payment? Can you break out your personal checkbook, or do you have to head down to the bank to get a cashier’s check or money order? And what’s the difference between a cashier’s check and a money order, anyway?
Though they’re similar, cashier’s checks and money orders are two different payment methods, and they can not be used interchangeably. For example, when paying bills, a money order may be more useful, but when making a larger purchase, you may have to use a cashier’s check. Let’s go over what both a cashier’s check and money order actually are, explain some of the key differences between them, and describe what they have in common.
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What Is a Cashier’s Check?
A cashier’s check is a prepaid check issued from a bank, credit union, or financial institution. All of the information is printed onto the check, instead of manually written, including the recipient and the amount. It must be signed by a bank teller or cashier to be validated, similar to how you must sign a personal check to authorize it. A cashier’s check offers more security than a personal check because it’s backed by funds from your bank, instead of from your personal account. This eliminates the risk of the check bouncing.
That being said, cashier’s checks are ideal for situations where you need to guarantee your check won’t bounce. They’re also frequently used when making a large purchases, such as for a down payment on a house or car, and for similar situations in which you can’t use a debit or credit card. So, while their uses may be somewhat limited, cashier’s checks are often used for significant purchases in high amounts.
What Is a Money Order?
A money order is a printed certificate of payment worth a certain amount of money and made out to a specific recipient. Because they are prepaid, you must use cash or a debit card to purchase a money order before it’s issued. This also makes paying by money order a more secure method of payment than paying by personal checks or cash. Like a cashier’s check, a money order will not bounce.
Money orders are useful in a number of situations, such as when:
- You don’t have a bank account but need to pay utility bills;
- You want to send money in the mail;
- You need to ensure a check won’t bounce;
- You want to send money internationally;
They may not be ideal for everyday transactions, like paying for your groceries, but money orders still have many common uses.
Differences Between a Cashier’s Check and a Money Order
Though they’re both prepaid, preprinted, and secure certificates of payment, there are several key differences between cashier’s checks and money orders:
- Limit: Money orders have a much lower limit than cashiers checks. It may vary depending on the issuer, but most money orders have a limit of $1,000; cashier’s checks, on the other hand, have a much higher limit, which is why they’re typically used for large purchases.
- Place of purchase: Cashier’s checks can only be purchased at a bank or credit union, but you can purchase money orders almost anywhere. In addition to banks, you can find money order services at grocery stores, pharmacies, department stores, the post office, and at money service stores.
- Cost: Money orders typically cost less to purchase than cashier’s checks. Issuers and retailers charge different fees, but they typically range from anywhere between $0.50 to $5. Cashier’s checks usually cost a minimum of $10 and can get even more expensive depending on where you buy them and the amount you purchase them for.
- Fund availability: Once you deposit your money order, only $200 will be available immediately (or in the first business day), and you will have to wait an additional day or two to receive the rest of your funds. After depositing a cashier’s check, up to $5,000 will be available within the first business day.
- Trust: Though both cashier’s checks and money orders are secured forms of payment, cashier’s checks are typically more trustworthy because they are guaranteed by the bank. Money orders may not be considered as secure and some institutions might not accept them as an alternative.
How Money Orders and Cashier’s Checks are Similar
Of course, money orders and cashier’s checks have plenty in common — if they didn’t, it wouldn’t be so easy to get them mixed up. Some of their most notable similarities include:
- Secured payment: Both cashier’s checks and money orders are guaranteed forms of payment; the difference comes from who guarantees the payment.
- Similar to a check: The process of depositing a cashier’s check and money order are both incredibly similar to cashing a check.
- Private: Cashier’s checks and money orders are much more private than a check. They don’t display your address, phone number, or bank account number, making either of them a great choice for paying someone you don’t know or trust.
- Used in scams: Unfortunately, both money orders and cashier’s checks are commonly used in money transfer scams.
- Difficult to cancel: Both cashier’s checks and money orders are difficult to cancel or replace if they’re lost, stolen, or damaged. You may be able to get a refund on your money order, but cashier’s checks can be even more difficult and frustrating to replace.
Differentiating between cashier’s checks and money orders isn’t difficult, but it is important. Having another payment tool in your arsenal will help ensure that you can make the best decisions possible for yourself and your finances. And now, when a situation requires you to use a guaranteed form of payment, you’ll know if it’s best for you to use a cashier’s check or a money order.
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