Money order vs. cashier’s check: The 411 on their differences

Having to choose between a money order vs. cashier's check isn’t common these days, especially because smartphones can handle most financial transactions. However, understanding these traditional payment methods remains surprisingly relevant to effective money management, even in a digital world.

Certain financial scenarios may call for paper-based payment solutions, including major purchases, sending guaranteed funds for someone to cash without a bank account, or navigating situations where cash is risky and digital payments aren't accepted. The key is knowing which to choose, when to use them, and how they fit alongside digital options.

Dive into this guide to discover the crucial difference between cashier’s checks and money orders and how they might be the solution for certain transactions.

What is a money order?

A money order is a secure payment tool that can be used as an alternative to personal checks and cash. Unlike writing a personal check, a money order represents prepaid funds, eliminating the risk of insufficient funds when the recipient deposits or cashes it.

Money orders contain:

• The recipient’s name

• The sender’s information

• A unique tracking number

Pros

• Trusted by most businesses, organizations, and individuals

• Provides accessible financial services

• Increases security between unfamiliar parties

• Enables transactions where digital payments may be limited

Cons

• Requires upfront payment

• Fund limits cap transactions

• Verification can cause processing delays

• Can be targeted for check fraud and scams

How to get a money order

Getting a money order is fairly straightforward and can be completed at numerous locations following these steps:

1. Find an issuing location like a post office or bank.

2. Bring a payment method that isn’t a form of credit, like cash or a debit card.

3. Specify the amount to the cashier.

4. Fill out the recipient information for who or what organization will receive the funds.

5. Fill out the sender information with the payer’s name and address.

6. Sign the money order on the designated signee line.

7. Pay for the money order, including any associated service fees.

8. Keep the receipt or carbon copy in a safe place as proof of purchase.

When to use a money order

Money orders can be practical financial tools in specific scenarios where security, accessibility, or payment verification are priorities. Consider using a money order for:

• Rent payments: Money orders provide guaranteed funds, eliminate the risk of bounced checks, and create a paper trail that serves as proof of payment for both parties.

• International money transfers: When sending funds overseas, international money orders offer a secure alternative to cash and are available in various currencies.

• First-time transactions: When dealing with unfamiliar merchants or individuals, money orders protect banking information like account and routing numbers while assuring payment to the recipient.

• Court-ordered payments: Many courts and government agencies accept or require money orders for fees, fines, or mandated payments due to their guaranteed nature and ability to be verified.

What is a cashier’s check?

A cashier’s check is a formal and secure payment tool issued exclusively by financial institutions. The fundamental difference between a cashier's check vs. money order lies in who guarantees the funds. With a cashier's check, a bank or credit union serves as the guarantor.

This type of payment method often contains:

• The financial institution’s name and logo

• Watermarks

• Security threads

Cashier's checks typically accommodate larger transaction amounts, making them appropriate for significant purchases like real estate down payments, vehicle purchases, or substantial security deposits.

Pros

• Funds guaranteed by a financial institution

• Uses enhanced security features

• Accommodates larger transaction amounts

Cons

• Higher fees than money orders

• May have holds placed on deposits, especially for large amounts

• Verification can be time-consuming

How to get a cashier’s check

Obtaining a cashier's check involves a more formal process than getting a money order, as it requires working directly with a financial institution. To get a cashier’s check, follow these steps:

1. Verify that a financial institution offers cashier’s checks.

2. Gather the information needed for a cashier’s check, including the recipient's legal name and the correct type and amount of funds.

3. Visit a physical bank or credit union during regular business hours.

4. Request a cashier’s check from the teller.

5. Verify the check’s information, particularly the recipient’s name and amount.

6. Pay the fee for a cashier’s check.

7. Obtain a receipt and store it in a safe place.

When to use a cashier’s check

Cashier's checks can be valuable in specific financial scenarios where payment security and guarantee are paramount. Consider using a cashier's check for:

• High-value transactions: High-value items like vehicles, boats, or expensive electronics that exceed typical cash or debit card limits may need additional security and guarantees.

• Real estate transactions: Title companies and real estate agents may request cashier’s checks for down payments, earnest money deposits, and closing costs.

• Security deposits: Significant deposits for apartments, rental properties, or equipment may require payment guarantees.

• Tax payments: Large tax payments to government agencies may require more secure payment methods.

Money order vs. cashier’s check: Safety and security features

Both money orders and cashier’s checks are considered secure forms of payment, especially compared to cash or personal checks. Each has features that help reduce the risk of fraud, loss, or non-payment.

Money orders support safety and security features like:

• Fund limits to reduce exposure to fraud or loss

• Various payment methods to protect personal banking details

• Payment and payee verification before processing

Cashier’s checks offer features like:

• Financial institution backing to guarantee payment amounts

• Anti-fraud components like watermarks and security threads

• Special paper with chemical sensitivities