Although money orders and cashier’s checks are not as common as they used to be, you will still likely deal with them at one point in your life. This article gives a rundown of what you need to know about each, plus the differences between the two.
Protecting checking accounts from fraud and financial loss is an ongoing battle waged by depositors.
With credit card skimmers, check-cashing scams and a number of other dangers threatening people’s checking account security, many people turn to cashier’s checks and money orders as safer forms of payment over debit cards and traditional checks.
The difference between a money order and cashier’s check — and when it’s most appropriate to use each type — isn’t always so clear.
To help you understand which payment option is best for which situation, check out key information about cashier’s checks versus money orders.
Differences Between a Money Order and a Cashier’s Check
A money order is a document, similar to a check, used for making a payment. Since they are prepaid, the funds are considered guaranteed forms of payment. Keep in mind though that money orders are sometimes used in scams, so be sure to be careful when using them.
A cashier’s check, also called a bank check, is another form of guaranteed payment. However, you’ll need a bank account to get a cashier’s check.
Cashier’s checks and money orders share several features that may make either one a good choice, all else being equal.
Check-like: Whoever receives one of these instruments will deposit it just like a check, or they can attempt to cash the payment if their bank allows.
Seller-preferred: Both are considered to be safer for recipients than personal checks because they’re guaranteed (the question is who guarantees the instrument), and therefore less likely to bounce. However, fake documents are common, so sellers need to verify legitimacy before sending anything of value.
Private: Money orders and cashier’s checks do not contain your checking account number. That makes them safer than personal checks, which are full of valuable information. Assuming you don’t know or trust whoever you’re paying, you might not want to reveal your full name, phone number, or home address.
Difficult to unwind: You can attempt to cancel either one, but the process can be cumbersome. If the recipient cashes the payment, you’ll be out of luck.
Purchasing a Money Order
You can purchase a money order from your bank or credit union. You can also purchase a money order through the post office or businesses that offer them. Money orders can also be purchased at grocery stores, banks and credit unions, convenience stores, and U.S. post offices.
When you purchase a money order, the bank will either accept cash or direct debit your account. Most banks charge a fee for money orders, though they may waive the fee if you have certain types of accounts with them.
When purchasing a money order, you’ll need the amount of the money order and the name of the payee. Avoid making the money order out to cash, and always keep your receipt. The maximum amount of money orders is $1,000.
Whento Use a Money Order
Unlike a personal check, when you give someone a money order, they know the funds are guaranteed. With a normal check, it typically takes a few days before recipients can access the money because the receiving bank has to make sure the sender has enough to cover the amount.
Use a money order in situations where you need to pay someone and need the payment to be secure but available immediately.
Because a money order is prepaid and backed by a third party, it can be used for situations where you need to provide immediate funds, but still want to do it securely.
For example, you could use a money order when paying for something at the Department of Motor Vehicles, where funds need to be transferred on the spot. When you fill out a money order, you’ll sign it and select a recipient, creating an official record and making it a more secure option than cash.
Money orders can also be advantageous for people without a bank account. If you have bills or need to make an official payment, money orders offer a secure way to send money without needing to have a bank account.
It depends on where you buy it, but some issuers allow you to use a credit card, check or debit card to purchase a money order. Check with your issuer before purchasing to be sure.
Benefits of a Money Order
There are a few benefits to a money order:
Convenience: A money order tends to be easier to get than a cashier’s check. You can buy them at banks, post offices, small shops, grocery stores and more. Many supermarkets like Walmart (WMT) – Get Report will often process money orders, and a global network exists to move money around the world via money order.
Some Security: You make a money order out to its recipient just like you do with a personal check. A money order can also be canceled before it is cashed in case it gets lost, something happens or you change your mind.
Cost: Money orders tend to cost less. On average a money order will cost around $1 – $5 in processing fees, which will come in particularly handy if you have to send a lot of them. The barrier to entry is also lower. You don’t need a bank account to issue a money order. You can buy one with cash, making this a better option for someone who either has no accounts or can’t access them.
Negatives of a Money Order
Then again, there are some cons:
Low-limit: Money orders tend to have caps. You typically can’t send more than $1,000 via money order, making this difficult for moving large amounts of cash around or paying for big-ticket items like rent.
The ubiquity of money orders also means that these are a popular tool for fraud: Be careful when receiving a money order, and when sending one confirm that the person got the correct amount.
It may be unfair, but there it is: Cashier’s checks have an image of legitimacy that money orders do not. Depending on who you’re dealing with you may want to choose a cashier’s check just to send the message that a financial institution stands behind you.
Purchasing a Cashier’s Check
You can purchase a cashier’s check at your bank or credit union, and the charge will usually be around $8. You will need to present the following to purchase a cashier’s check: a valid ID, available funds in your account, as well as the amount of the check, to whom it is payable, and anything you’d like to include in the memo portion of the cashier’s check.
Once you purchase the cashier’s check, the funds will be removed from your account and transferred into the bank’s account. (That’s how they guarantee payment.) Once the check is cashed or deposited by the payee, then the funds will be removed from the bank’s account.
When to Use a Cashier’s Check
Cashier’s checks are typically used when you need to make a large purchase and are asked to bring guaranteed funds—like when you are closing on a home or purchasing a new car. Rather than carrying around a bag of cash, cashier’s checks offer a great way to securely transport and facilitate large payments.
Cashier’s checks are also great options for people with bank accounts who need to make payments with certified funds.
To get a cashier’s check, you’ll have to go to your bank and first make sure you have enough funds to cover the check amount. (The bank will hold your funds until the check is cashed.) You’ll then ask the teller for the cashier’s check, give them the recipient’s information and pay the fee associated with the check.
Benefits of a Cashier’s Check
So, for example, Sue goes to the bank and withdraws a $500 cashier’s check. She pays the bank $500 by having it debited from her checking account and walks out with a check worth $500. This has several benefits:
More Security: There are security upsides to a cashier’s check too. The bank fills out a pay-to line when the check is issued, meaning that there is no chance of you misplacing a money order slip or of someone filling in a different name. In cases of fraud or mistake you also have more protections. Your bank will generally insure you against error or fraud far more thoroughly than a money order outlet, meaning that in many cases you’ll get your money back whereas a money order would simply go through.
Larger Purchases: A cashier’s check has higher limits than a money order. The exact amount depends on your bank. While many banks issue practically unlimited amounts on a cashier’s check, they will typically also put a hold on processing any check larger than $5,000 to confirm the transaction.
Legitimacy: This is the counterpoint to above. With a cashier’s check you and the recipient deal with a bank. This has the legitimacy that comes with working with a financial institution, from both assurances that the recipient’s money will be there to the image of walking into a Bank of America (BAC) – Get Report rather than a convenience store. As a result more people are likely to accept a cashier’s check than a money order.
Negatives of a Cashier’s Check
Then again, a cashier’s check isn’t always the best idea, because of:
Loss: In case of error or fraud your bank will almost certainly have your back far more than a money order, and their institutional protections make both less likely. However, in many ways a cashier’s check is the same as carrying around a pocket full of cash. If you lose it and don’t have the receipt, there’s not much your bank can do.
Convenience: You need to get a cashier’s check from your bank, so no picking one up while grabbing a soda. You also may be on your own sending the check. This last is particularly inconvenient when sending money globally. If your buddy needs a quick loan to cover his bar tab in Saigon, Western Union (WU) – Get Report may be the way to go.
Cost: Cashier’s checks tend to cost about $10 to process. Not a big deal for a single check, this might become important for someone who needs them regularly.
1. What is a cashier’s check?
A cashier’s check is a check that is issued by a bank, in which funds are guaranteed by the bank since it comes from the financial institution.
2. What’s the difference between a cashier’s check and money order?
Both cashier’s checks and money orders essentially do the same thing, but the difference is that a cashier’s check is written out by a bank, whereas a money order is not.
3. How much do you charge for a money order?
We never charge a fee for purchasing a money order – they are always FREE! At Amscot you only pay the face value of the money order.
4. Will you cash a money order?
Yes. We will cash any money order, for any amount.
5. How much does cashier’s check cost?
If you’re already a customer at the bank you’re seeking a cashier’s check from, you can find the cashier’s check fee in your checking account fee schedule.
A cashier’s check is the way to go for large, infrequent purchases. If you’re buying a car with cash, for example, or making a significant investment, the high caps and strong security make this your best bet.
On the other hand, a money order is your go-to for day-to-day transactions. Sending someone $100 or making a routine transfer home are good times to use your local post office.
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