Are you wondering about the difference between a cashier’s check and a money order? Many people mistakenly use these terms interchangeably, but they are not the same. Understanding the unique features of a cashier's check versus a money order can help you choose the most appropriate option for each situation.
Side-By-Side Comparison: Cashier’s Check Vs. Money Order
| Feature | Cashier's Check | Money Order |
|---|---|---|
| Issued By | Banks and credit unions | Retailers, post offices, financial institutions |
| Cost | Varies, sometimes free for account holders (typically $5 to $10) | Typically lower than cashier's checks (Ex. $1 to $2) |
| Maximum Amount | Often higher than money orders | Typically capped (ex. $1,000) |
| Security | Bank-guaranteed funds | Prepaid, doesn't bounce |
| Ideal for | Larger transactions that require extra security | Smaller transactions, rent payments, sending money abroad |
What Is A Cashier’s Check?
A cashier’s check is issued by a bank and backed by the bank’s own funds. While personal checks cannot be cashed unless the payer has sufficient funds in their account, cashier’s checks are guaranteed by the banking institution[1]. This guarantee makes them a more secure form of payment when compared to paying by cash or a personal check.
When a banking institution issues a cashier's check, it's signed by an authorized official, such as a cashier or bank officer, further ensuring its authenticity. These extra layers of security make cashier's checks an appropriate option for large transactions and situations where fraud could be a concern.
Where To Get A Cashier's Check
Cashier’s checks come from banks or credit unions. These institutions may be more inclined to issue a cashier’s check when you already have an active account. When ordering a cashier's check, be prepared to provide information such as the exact amount of the check and the recipient’s name.
The institution requests payment for the amount upfront and there’s also often an additional service fee, although this can vary by institution. Some may reduce or waive the fees for premium or long-standing account holders.
Before leaving the bank or credit union, review the check’s details for accuracy. Also, ensure the cashier’s check is for a legitimate and verified transaction. Since it is a guaranteed form of payment, you may find it difficult or impossible to cancel a cashier’s check or reclaim the funds after it has been cashed.
Situations When You Might Use A Cashier’s Check
Cashier’s checks are often used when the payee needs assurance that the funds are available or when other forms of payment may be considered risky. This includes:
- Large purchases: Cashier’s checks are often appropriate for high-value transactions, such as buying a new car, a piece of jewelry, or making a down payment on a home.
- Rental deposits: Since the funds are guaranteed, landlords and property managers sometimes prefer and may require a cashier’s check for security deposits or the first month’s rent.
- Online sales: It’s common for online sellers to request a cashier’s check when selling high-ticket items like furniture or collectibles.
- Transactions between strangers: In situations where parties don’t know each other well, a cashier’s check can bridge the trust gap by ensuring the payment is genuine and a financial institution guarantees the amount.
- Real estate closing costs: When finalizing a real estate purchase, the closing agent may request a cashier’s check to cover the closing costs, ensuring that the funds are immediately available.
What Is A Money Order?
A money order is a prepaid form of payment with characteristics of both a personal check and a cashier's check, as well as some unique differentiators. While they are often used in the same way as a personal check, money orders are prepaid and cannot be returned for insufficient funds. This may sound much like a cashier's check. However, while cashier's checks are typically issued by banks or credit unions, money orders can be purchased from various types of stores. This includes grocery store service counters, U.S. post offices, and dedicated cash-checking businesses. Retail chains and drug stores may also offer money order services.
The fees for a money order vary depending on the purchase location and the amount of the money order. However, they are generally lower than the fee for a cashier's check. This is one reason money orders are used by individuals who do not have a bank account or want to avoid providing their personal banking details.
Each money order comes with a unique tracking number, providing a paper trail for both the sender and the recipient. The maximum amount for a single money order can vary depending on where it’s purchased. However, it’s generally lower than the maximum for cashier’s checks. This limit may make it necessary to purchase multiple money orders for larger transactions.
Situations When You Might Use A Money Order
Money orders are a versatile payment tool suitable for a range of situations that require secure, guaranteed payments. This may include:
- Rent payments: Landlords may prefer money orders over personal checks to eliminate the risk of bounced checks and the associated fees. Unlike cash, paying by money order also gives the renter a paper trail.
- Sending money overseas: Money orders can be an efficient method of sending money abroad, especially when other means of electronic fund transfer are unavailable or unreliable.
- Purchasing from unknown sellers: When purchasing from someone you don’t know, a money order can ensure payment without disclosing personal banking details.
Choose the Right Payment for Every Situation
Both cashier’s checks and money orders offer secure payment solutions. The right choice depends on a variety of factors, including the specifics of the transaction, the amount involved, and your ability to access banking institutions.
Whether you’re making a large down payment, sending money overseas, or avoiding cash, understanding the strengths of each option can help you make an informed decision.
When in doubt about which method to use, it’s helpful to consult with a financial expert. If you’re looking for guidance tailored to your specific circumstances, the team at PNC Bank is here to help. Contact us today to learn more.
