Saturday, October 15, 2016

What Is The Difference Between Money Order And Cashier Check

Money orders and cashier’s checks are similar. They are both used as a “secure” form of payment, and they even look alike. But there are some important differences between the two that might determine which is best for your situation.

For a refresher of each item individually, see How Cashier’s Checks Work or read about the Basics of Money Orders.

Compare and Contrast
Maximum issue: a major difference between money orders and cashier’s checks is the maximum dollar limit.

Money orders often have maximum limits around $700 or $1,000 – actual limits depend on the issuer. Cashier’s checks, on the other hand, are available in much larger amounts (they're commonly used for a down payment on a home, which can be hundreds of thousands of dollars or more).

Where to get them: you can buy money orders by walking into any place that sells them  – grocery stores, post offices, pharmacies, and convenience stores, for example. You can even get them at banks and credit unions. However, cashier’s checks are only available from banks and credit unions, and you generally have to have an account at the bank to get one.

If you don’t have a local bank account, or if there’s no branch nearby, you'll have a hard time getting a cashier's check quickly. That’s just one reason to keep a local bank account (which can save you time and money in several ways). Your alternatives include:

Order a cashier's checks online, by mail, or fax from your online or out-of-state bank
Walk into a local bank or credit union and ask if it’s possible to pay cash (or use a debit card cash advance) for a cashier’s check
It's not impossible to get a cashier's check without a local bank account, but it's a challenge.

If you order online, some banks restrict who the check can be made payable to or where it can be mailed.

It is difficult or impossible to get a money order online.

Trust: credibility is another difference between money orders and cashier’s checks. Cashier’s checks are drawn against a bank and guaranteed by the bank, while money orders are issued by other types of organizations. Sometimes a money order is perceived to be less secure than a cashier’s check and will not be accepted as a substitute. However, cashier's checks (like money orders) can be fakes and are sometimes used in scams.

Cost: Cashier’s checks are typically more expensive than money orders, which makes sense if you consider the differences listed above – cashier's checks simply have more horsepower. They're also issued by banks, which don't have a low-cost reputation like most mass retailers who sell money orders for a dollar. However, cashier's checks can be less expensive in some situations. If you can pay a single fee – $10 or so – for a large cashier's check versus multiple fees for multiple (maximum dollar limit) money orders, the single fee might be better

"Stop payment" or cancellation: what happens if you lose one of these instruments or it gets stolen? You'll want to get your money back or you'll want a replacement. This is a little bit easier with a money order (be sure to keep your receipt when you buy it), but it's probably not free and you can expect to wait 30 days or more. With a cashier's check, you might need to wait 90 days after submitting your request, and that will be a bummer unless you have a lot of extra cash on hand.

Funds availability: when you deposit a cashier’s check, you can generally get the first $5,000 available within one business day. Money orders are often treated differently, with longer hold times (and only the first $200 available in one day). USPS money orders get better treatment than other types of money orders.

Sometimes it's helpful to compare and contrast. So what are some of the similarities that cashier's checks and money orders share?

Whoever receives one of these instruments will deposit it like a check
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
Your personal checking account number does not appear on a money order or cashier's check, so it's safer than handing over a personal check with lots of valuable information (assuming you don't know or trust whoever you're paying)
You can attempt to cancel either one, but the process can be cumbersome and if it's already been cashed you'll be out of luck
Alternative Ways to Pay

There are several other ways to make (or receive) payments. Depending on your needs, there might be a less expensive, more secure, or more convenient method available.

Online payment services can work well for online transactions as well as person-to-person payments. Sending money is often free or inexpensive, and fees vary for vendors who accept payments online. Be mindful of security, whether you're making or receiving payments. Get familiar with the process for reversing payments, and evaluate your risk. For example, selling items with a payment from PayPal or Venmo can be risky.

Wire transfers are another option for sending "cleared" (or guaranteed) funds. Wire transfers are same-day electronic transfers between banks. They often cost around $35, and there's typically no way to reverse a wire transfer after it's completed. As a result, they are safer for recipients than for the person sending a wire transfer. The process of sending a wire is cumbersome, so they're used for infrequent, large transactions.

Debit and credit cards are commonly used to make purchases. For buyers, the benefit is ease-of-use. Your card number could get stolen, but it's relatively easy to cancel the card and get a new number (compared to closing your checking account). Credit cards add an added layer of protection for buyers, and are safer than debit cards. Cards are less popular for sellers because buyers can reverse the charges if they claim fraud. What's more, you'll need a way to accept card payments, and it costs extra to accept credit cards.

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