What’s the difference between a cashier’s check and a money order?

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Personal checks can bounce, credit card payments can be declined or disputed, and few people want to carry around large amounts of cash. That’s where cashier’s checks and money orders come in handy.

Cashier’s checks and money orders allow you to make guaranteed payments, with funds available immediately to the payee. When you pay using a personal check from a regular checking account, the payee may have to wait a few days to receive the money.

What is a cashier’s check?

A cashier’s check is a check issued by a bank to a third party, usually on behalf of a bank customer, who pays the bank the face value of the check. The check is drawn on the bank’s funds, so the recipient can be sure the funds are available. A cashier’s check can be used for large payments over $1,000. A cashier’s check may cost you around $10.

What is a money order?

A money order is a paper document that allows you to send money to a third party securely and inexpensively. The issuer is paid the face value of the money order, so the payee can be confident the money order is good and that he or she will receive the amount specified. Money orders are usually an instrument used to pay smaller payments. Many issuers have a $1,000 cap on money orders.

When to use a cashier’s check vs. money order

Cashier’s checks and money orders are similar forms of payment, but each has advantages and drawbacks.

Use a money order if …

  • You’re making a payment of less than $1,000.
  • You need to make a payment but don’t have a bank account.
  • The payee needs immediate access to the money.
  • You’re confident the money order won’t be lost or stolen.
  • You want an inexpensive way to pay bills or transfer funds.
  • You want a payment instrument that is highly accessible, easy to buy.

Use a cashier’s check if …

  • You need to make a payment of over $1,000 for a major transaction, such as buying a home or boat.
  • You want maximum security to guard against loss or theft of the money.
  • The payee needs immediate access to the money
  • You prefer a payment method you can get from your bank, either online or at a branch.
  • You don’t mind paying a substantial fee, usually around $10, for the service.

Transactions that may require a money order or cashier’s check include: securing an apartment lease, buying a used car, closing on a home purchase and anytime you must send money by mail

Generally, people, such as homesellers, require cashier’s checks or money orders when they want to be sure that the payer has the funds. In order to obtain either a cashier’s check or a money order, you need to pay the full amount upfront in cash (or sometimes with a debit card), and the issuer charges a fee for the service.

A cashier’s check or money order is guaranteed and can be redeemed only by the payee. Cashier’s checks are available at banks and credit unions. The issuing bank will fill out the “pay to” line, which helps prevent the check from being fraudulently cashed in case it’s lost or stolen.Where to buy cashier’s checks and money orders

Both cashier’s checks and money orders can be purchased at banks and credit unions, but money orders can be bought at many other places, including various grocery stores and convenience stores, Western Union, the post office and Walmart.

Money orders are relatively inexpensive, making them a good choice for smaller transactions. The U.S. Postal Service charges $1.25 for money orders up to $500, and $1.75 from $500.01 up to $1,000.

If you have a bank account, your bank may not charge you for cashier’s checks or you may pay less than non-customers. Not all banks issue cashier’s checks to non-customers, but many banks do. Just be prepared to pay a fee.

Bottom line

Cashier’s checks and money orders are safe, reliable forms of payment. If you’re unsure which type of guaranteed payment would be best for a particular transaction, ask your bank or credit union, which should be able to recommend the best option for you, even if it means sending you to the post office.

Featured image by Andrey Popoy of Shutterstock.