In the world of finance, there are many different types of payment instruments that can be used for various purposes. Two such instruments that are commonly used are cashier's checks and money orders. Although they may seem similar, there are some key differences between the two that individuals should be aware of. Although WaFd Bank only supports Cashier's Checks, the information below will help you better understand the differences between cashier's checks and money orders.
What is a Cashier's Check?
A cashier's check is a payment instrument that is guaranteed by a bank or credit union. When someone requests a cashier's check, they provide the bank with the amount of the cashier check plus a fee to cover any associated costs in the form of cash or as a withdrawal from your account. The bank then withdraws the funds from the requester's account and issues a check in the requested amount. Because the check is guaranteed by the bank, it is considered a secure form of payment, and often required for large purchases or transactions.
What is a Money Order?
A money order is a form of payment that can be obtained from various sources, including banks, post offices, and convenience stores. When someone requests a money order, they provide the issuer with the amount of the money order plus a fee to cover any associated costs. The issuer then prints a money order in the requested amount, which the requester can then use as payment.
Differences Between Cashier's Checks and Money Orders
- CostBanks typically charge a fee for issuing a cashier's check. The fees associated with cashier's checks and money orders can vary depending on the institution. WaFd's fees for a Cashier's Check.
- LimitsCashier's checks often have a higher limit than money orders. Banks may be more willing to issue cashier's checks for larger amounts, whereas money orders may have a maximum amount limit, usually around $1,000.
- SecurityCashier's checks are considered more secure than money orders because they are guaranteed by a bank. However, if a money order is lost or stolen, it can be replaced, making it a more secure option than sending cash in the mail.
- AcceptanceCashier's checks are more widely accepted than money orders, particularly for larger purchases. Cashier's checks are guaranteed by the bank and are often required for purchases such as a car or a house. Money orders are generally accepted at smaller businesses, such as rental properties, and some government agencies and are not backed by a bank.
Which Should You Choose?
Deciding whether to use a cashier's check or a money order ultimately depends on the specific transaction and the amount involved. If the purchase is large, such as a house or a car, a cashier's check is usually the require method of payment. If the purchase is smaller and the seller accepts money orders, a money order may be a less expensive and still a secure option. Ultimately, it's important to weigh the costs, benefits of each option and the recipient of the funds before making a decision.