Transaction

Both cashier’s checks and money orders are forms of payment that are guaranteed, but money orders tend to be for smaller amounts and to cost less.

With both of these payment forms, the payer’s funds are tapped before they’re issued, so there’s no risk of the money not clearing, which can be a considerable advantage over personal checks. Money orders have limits on the dollar amount but cost less to obtain — and don’t require a bank account. You can get a cashier’s check for a much larger amount, but you generally need to acquire it from a bank or credit union, and it’ll cost a bit more.

What Are Money Orders?

Money orders are a form of guaranteed payment that you can purchase at a bank or credit union, post office, money transfer service company, big-box retailer like Walmart, and even some convenience stores and supermarkets.

A money order offers assurance to the person you’re paying: Because you prepay for the money order, the payee knows that the funds are guaranteed. (This is not the case with a personal check, which could bounce when they go to deposit it.)

Although they are called money orders, this is a form of paper payment, much like a check drawn on your checking account.

How Do Money Orders Work?

Money orders can work well as a secure and convenient way to transfer funds. They typically only cost a few dollars at most, and they’re a great solution for someone who doesn’t have a bank account and thus no access to paper checks. You can fund a money order with cash, a debit card, or traveler’s checks. In some cases, you can also buy a money order with a credit card.

However, money orders usually have a $1,000 limit domestically (and $700 internationally).

What Are Cashier’s Checks?

Like money orders, cashier’s checks are prepaid and thus offer the payee a higher level of confidence that the payment will go through. Available from financial institutions where you bank, cashier’s checks are often available for large amounts (there may not be any upper limit) and with more security features. This can make them useful in real estate and other transactions that involve major sums of money.

Recommended: Certified Check vs. Cashier’s Check

How Do Cashier’s Checks Work?

You can usually only purchase a cashier’s check at a bank or credit union — and the financial institution may only offer them to current members. As with a money order, you pay for a cashier’s check in advance but in this case with funds from your account. The bank will hold those funds until the recipient deposits the cashier’s check.

Cashier’s checks cost more money (around $10, generally), but they offer greater security features than money orders. Cashier’s checks are ideal for large purchases; there isn’t a $1,000 limit as there usually is with money orders.

Pros and Cons of Money Orders?

Money orders offer a number of advantages, but they also have some drawbacks to consider.

Pro: Available to Unbanked Consumers

Money orders don’t require a bank account to purchase them. For the 4.5% of American households that are unbanked, this option provides a way to send money securely.

Pro: Wide Availability

Money orders are available at many locations you may visit during daily errands. You can buy a money order at the post office, the bank, Walmart, Western Union, or sometimes even your grocery store or a nearby convenience store. And with fees of just a dollar or two, they can also be an affordable option.

Pro: Guaranteed Payment

Because you prepay for a money order, the payment is guaranteed. This offers assurance to whomever you’re paying — and is sometimes required for transactions to be completed.

Con: Purchase Limitations

Money orders are typically capped at $1,000 domestically (and even less internationally). If you need to make a larger payment, you may need to get a cashier’s check or find another payment method.

Con: Security Concerns

Both money orders and cashier’s checks offer more security than personal checks — and certainly more security than using cash to make a payment. What’s more, neither payment option displays your account information (like a personal check).

That said, money orders offer fewer security features than a cashier’s check. For example, if a money order is lost or stolen before you fill out all the required information, anyone could fill it out for themselves and take the money. (With a cashier’s check, the payee’s name is filled out when it’s purchased.)

Pros and Cons of Cashier’s Checks

Cashier’s checks also carry a number of pros and cons:

Pro: Larger Purchase Amounts

Cashier’s checks are ideal for larger transactions, like when making a down payment on a new car or paying closing costs on a house. If you need guaranteed payment for more than $1,000, a cashier’s check can be a good way to go.

Pro: More Security

Cashier’s checks are backed by a financial institution and typically have more security features than a money order. This may be worth the cost: For a few more dollars, you may have additional peace of mind.

Pro: Fast Access to Funds

When you deposit a personal check, it could take a few days for the funds to be available. But because cashier’s checks (and money orders) are prepaid, the recipient can usually get immediate access to funds.

Con: Cost

Cashier’s checks are typically around $10, making them more expensive than money orders. Personal checks are free, as long as your bank has already provided you with a free checkbook.

Con: Limited Availability

You can’t get a cashier’s check just anywhere; you likely need to get them at a financial institution where you bank. (In rare cases, you may be able to purchase one at a financial institution where you are not an account holder.)

When to Use a Money Order vs. a Cashier’s Check

While you can use a money order or a cashier’s check in many scenarios, here are times it may be better to go with a money order:

•   It’s a small transaction: Money orders are generally secure and are more affordable than cashier’s checks. If the transaction is under $1,000, you can usually save money by going with a money order.

•   You don’t have a bank account: If you don’t have a bank account, you probably won’t be able to get a cashier’s check. A money order may be your only option.

•   You’re already at the post office: … or the grocery store … or Walmart. If you don’t want to make a special trip to the bank for a cashier’s check, you can pick up a money order at several convenient locations.

Recommended: How to Switch Banks

When to Use a Cashier’s Check vs. a Money Order

Money orders can be an affordable and useful option, but in some scenarios, you might want to use a cashier’s check instead, such as when:

•   It’s a large purchase: Cashier’s checks aren’t bound by a $1,000 limit. If you’re making a big purchase and need guaranteed funds, a cashier’s check can work well.

•   You want bank-backed security: If the payee is hesitant about a personal check, they might also pause before accepting a money order. To ease any concerns from the person you’re paying, you may want to give them a bank-backed cashier’s check.

Tips to Protect Yourself When Using Money Orders or Cashier’s Checks

Cashier’s checks and money orders are typically more secure than cash and personal checks, but there are things you can do to stay safer when using these payment methods, such as:

•   Filling out money orders right away: If you lose a money order that doesn’t have the information filled out yet, anyone could fill it out to themselves and cash the money order. Banks typically fill out cashier’s checks before handing the paper over to you, reducing this risk.

•   Using reputable vendors: Thoroughly research a vendor before buying a money order. Because only banks and credit unions sell cashier’s checks, you can be more confident in the check’s authenticity upon purchase.

•   Keeping your receipts: In case any disputes arise, it’s a good idea to have your receipt. This may also enable you to stop the payment (if the recipient hasn’t yet cashed it), if needed.

Recommended: How to Overcome Bad Financial Decisions

The Takeaway

Cashier’s checks and money orders both offer a secure way to make guaranteed payments. Money orders can be better for smaller transactions and are available for purchase at more locations. Cashier’s checks, only available at banks and credit unions, offer heightened security and can be purchased for larger dollar amounts.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

How much does it cost to order a cashier’s check?

Cashier’s check prices can vary, but you can generally expect to pay around $10 for a single cashier’s check. This makes them slightly more expensive than money orders.

Are cashier’s checks or money orders easier to buy?

Money orders are typically easier to buy than cashier’s checks. Money orders are available at the post office, banks, Walmart, Western Union, and select supermarkets and convenience stores. They’re also more affordable, and you don’t need a bank account to purchase one.

Are cashier’s checks or money orders safer?

While both cashier’s checks and money orders offer security features that can make them safer than personal checks, cashier’s checks offer a higher level of safety than money orders since they’re backed by a financial institution (and for instance, the payee’s name is filled out at time of purchase). You can only purchase cashier’s checks at a bank or credit union.

Photo credit: iStock/AndreyPopov

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBK1222018

Source: sofi.com