Money order vs. cashier's check: What's the difference?
Quick insights
- A money order is an alternative to cash or a check, and generally allows the payer to send up to $1,000 per order.
- Cashier's checks may be more suitable for larger transactions, typically offering bank-guaranteed funds.
- Money orders are available at a variety of locations, while cashier’s checks are typically available at banks.
When you need to send money to someone or a place of business, but you can’t send cash or a personal check, money orders and cashier's checks may provide an alternative. Understanding the differences between them can help you select a useful option for your specific needs. Factors like cost, availability, safety and the type of transaction you’re paying for may also play a role in your decision.
Let’s explore some key differences between money orders and cashier’s checks to help you know when to use each one.
What is a money order?
A money order is a prepaid, paper-based payment method. It’s generally used as an alternative to cash or personal checks when you want to make a payment without using a bank account.
Money orders are typically available at a wide range of locations such as grocery stores, post offices, convenience stores and check-cashing businesses for a few dollars each.
Depending on the issuer, there may be a payment limit to a money order. For example, the United States Postal Service (USPS) has a maximum of $1,000Opens overlay per domestic money order. If you need to make a larger payment, you may need to purchase multiple money orders.
When to use a money order
Money orders may be convenient for the following situations:
- Smaller transactions: Money orders may be a good option for payments that fall under an issuer’s payment limit. Common uses include paying bills, buying goods or sending money through the mail.
- No bank account: If you don’t have a bank account, money orders may be an accessible option since they typically don’t require one to purchase.
- Cost-effective: Money orders generally have a low fee of a few dollars to purchase. Note that you’ll need to buy additional money orders for payments over $1,000.
- Safety: Users may want to take extra steps to ensure that they are purchasing a money order from a reputable source.
How money orders work
Here’s how the process of sending and receiving a money order works:
- Purchase: You can buy a money order using cash or, with certain issuers, a debit or credit card.
- Fill it out: After purchase, you’ll write the recipient's name on the money order and sign it.
- Tracking: You'll receive a receipt that allows you to track the money order.
- Cashing or depositing: The recipient can either cash the money order or deposit it into their bank account.
What is a cashier's check?
A cashier’s check is a payment method issued by a bank or credit union, with the financial institution guaranteeing the funds. In general, there isn’t a limit to the amount you can send via cashier’s check provided you have the funds to send it. Because of this, cashier’s checks are typically used for larger payments than something you’d use a money order for. While having a bank account is generally required to purchase a cashier’s check, some institutions may allow non-customers to purchase them, but there may be a fee.
When to use a cashier’s check
A cashier’s check may be a good choice in these scenarios:
- Large transactions: Cashier’s checks may be suitable for larger transactions, such as buying a car or paying a security deposit.
- Bank-guaranteed funds: Some payees, especially landlords or sellers, may require a cashier’s check because the funds are guaranteed from the bank.
- Cost: The cost of a cashier’s check is typically higher than a money order.
- Bank account required: A bank account is generally required to purchase a cashier’s check, although some banks may allow non-customers to buy one for a fee.
How cashier's checks work
Purchasing and sending money with cashier’s checks may include the following steps:
- Purchase: To get a cashier’s check, the required funds are withdrawn from your bank account or paid in cash.
- Issuance: The check is issued in the recipient's name. It may also include safety features, like watermarks, to help prevent fraud.
- Tracking: Your receipt may help you track the check in case it takes a while to cash or your recipient loses it.
- Cashing: You may cash a cashier’s check at a financial institution of your choice. If you are not an account holder with the financial institution, you may be required to pay a fee.
In summary
Choosing between a money order and a cashier’s check typically depends on your transaction size and your access to a bank account. If you need to make a small payment, a money order may be suitable, particularly if you're looking for a low-cost, easy-to-purchase option. However, if you’re handling a larger transaction, such as a down payment or property transaction, a cashier’s check may be a more appropriate choice.
In addition to these options, consider alternatives like peer-to-peer payment apps or wire transfers, which may offer fast and reliable payment solutions depending on the situation. By weighing the benefits of each payment method, you may be able to make the right decision for your financial needs.
