What are Cashier's Checks and Money Order Checks?

Robinhood Learn
Democratize finance for all. Our writers’ work has appeared in The Wall Street Journal, Forbes, the Chicago Tribune, Quartz, the San Francisco Chronicle, and more.
Definition:

Cashier’s checks and money orders are both safer alternatives to personal checks, but they are available in different places and have other important differences.

🤔 Understanding cashiers checks and money orders

People might be leery of accepting personal checks for large amounts of money since there’s no guarantee the check writer really has enough money in his or her bank account. Cashier’s checks and money orders are a way to transact money without the uncertainty of a personal check. Institutions guarantee cashier’s checks and money orders, meaning they sign or stamp the check as a promise that you’ll get your money. Cashier's checks are generally a bit more secure than money orders, since they come from banks and credit unions, while many types of businesses can issue money orders. Money orders are typically for much smaller payment amounts, while someone might use a cashier’s check for a much larger payment.

Example

Suppose you’re buying a used car from an individual you found in an online marketplace. The car costs several thousand dollars, and you’d prefer not to carry around that much cash. But the seller of the car doesn’t want to accept a personal check since he or she doesn’t know you well enough to trust that you have the money in your bank account. Instead, you might pay with a cashier’s check or money order. Because a third party issues and guarantees these checks, the seller feels more confident that he or she will get the money.

Takeaway

Using a cashier’s check or money order is like having car insurance…

When you’re out on the road, other drivers on the road want to make sure that if you hit them, you’ll be able to cover the damage costs. As a result, most states require drivers to have car insurance, which serves as an insurance policy for not only the individual, but for the other drivers on the road. Similarly, using a cashier’s check or money order acts as an insurance policy for the person accepting the check and assures him or her that the money is really there.

Ready to start investing?
Sign up for Robinhood and get your first stock on us.
Sign up for Robinhood
Certain limitations apply

The free stock offer is available to new users only, subject to the terms and conditions at rbnhd.co/freestock. Free stock chosen randomly from the program’s inventory.

Tell me more…

What are cashier’s checks and money orders?

Cashier’s checks and money orders are two secure forms of payment that someone can use in place of a personal check. Rather than coming directly from your bank account as a personal check does, cashier’s checks and money orders come from the account of the issuing entity. Whatever financial institution or organization you buy the check from also guarantees the amount.

What is the difference between a cashier’s check and a money order?

There are several differences between a cashier’s check and money order.

The first difference between the two comes down to where you can buy them. You can only get cashier’s checks from financial institutions. Money orders, on the other hand, you can get at financial institutions, as well as at post offices and many retailers.

The next difference between cashier’s checks and money orders relates to how much you’ll pay for each. In the case of a money order, you’ll often pay just a few dollars — Depending on where you buy your money order, you might even get one for less than one dollar. Cashier’s checks generally run for anywhere from just a few dollars to $10-$15. In this case, you may not have the choice of shopping around, as many financial institutions only sell cashier’s checks to existing customers.

Finally, cashier’s checks and money orders differ in how much you can write them for, and when the money is available. You may only be able to buy a money order for up to $1,000. Additionally, the recipient can only access the first $200 within the first business day and may have to wait longer for the rest of the money. Cashier’s checks are quite different in that you can get them for any amount, and the payee of the check can access at least $5,000 right away.

What is a cashier’s check?

A cashier’s check is a type of secure check that you buy from a bank or credit union to use for large purchases. Unlike a personal check, where the money comes directly out of your bank account when the recipient cashes it, a cashier’s check comes from the issuing bank’s account. Depending on where you purchase your cashier’s check, you’ll probably pay anywhere from just a few dollars to $10–$15.

What is a money order?

A money order is a type of secure payment that you can buy from a local financial institution, post office, or large retailer. The issuing entity guarantees the money order, being that entity is the one writing the money order instead of you. Unlike a cashier’s check, you usually can’t get a money order for more than $1,000. Depending on where you get your money order, you’ll pay anywhere from less than one dollar to a couple of dollars.

Which is safer, a money order or a cashier’s check?

Cashier’s checks and money orders are both secure ways of paying money to another person. In the case of both types of checks, the issuing entity, which is either a financial institution, post office, or retailer, guarantees the check. Some people might feel more secure using a cashier’s check, given that they come from a financial institution. That being said, neither cashier’s checks nor money orders are 100% safe. There’s always the chance of someone running scams or using counterfeit products.

When are money orders or cashier’s checks normally required?

You’re likely to need a money order or cashier’s check for an expense where the person receiving the check wants to make sure he or she is going to get the money you’ve promised them. One example of a situation of when you might need a money order or cashier's check is to pay rent. Your landlord doesn’t necessarily trust all of his or her tenants to have sufficient funds to pay with a personal check. Instead, you have to use a more secure form of payment. When you use a money order or cashier’s check, the money is coming not from your bank account, but from the entity that issued the check.

When should I use a money order versus a cashier’s check?

One of the primary factors in deciding when to use a money order and when to use a cashier’s check comes down to how much money you need to give to the recipient. Money orders might be ideal for purchases of hundreds of dollars, since they’re easy to get and only cost a dollar or so. But since money orders max out at $1,000, there could be plenty of situations where you’ll need to rely on a cashier’s check.

One situation when you might need a cashier’s check is for a real estate purchase. When you’re buying a house, the down payment can often be tens of thousands of dollars or more. You can’t get a money order for that amount, so you’d use a cashier’s check instead.

How do I purchase a money order or cashier’s check?

Money orders are pretty easy to get your hands on. Many post offices, financial institutions, and retail locations offer this service. To buy a money order, you’ll usually have to go to a physical location (though some services offer them online). When you arrive at the location, you’ll have to fill out the money order form and give the information as to whom the order should be made payable.

You’ll have to pay with either cash or a debit card (you usually can’t pay with a credit card), and you’ll pay the amount of the check plus the fee that the seller charges. When you buy a money order, you’ll receive tracking information to go with it. Tracking a money order allows you to see when the recipient cashes it — Since money orders don’t come directly out of your checking account, you can’t find this information through the same means you would for a personal check.

The process for cashier’s checks works a bit differently. First, you can only get cashier’s checks at financial institutions. Post offices and retail locations don’t sell these.

To buy a cashier’s check, you’ll go to the financial institution or website where you’re planning to buy your check. As with a money order, you’ll have to give information such as the check amount and the recipient of the check, so the issuer can make it out to the right person. You can also give a memo to print on the check, as you can with a personal check. You’ll also probably have to show a form of identification when you’re making the purchase.

Depending on what bank you’re using, you may only be able to get a cashier’s check if you have an account at the bank. When you buy the check, the institution will pull the cost of the check and a fee directly from your bank account (or it'll freeze that amount within your account).

How much do money orders and cashier’s checks cost?

The cost of cashier’s checks and money orders may vary depending on where you buy them. First, money orders tend to be lower-priced than cashier’s checks.

Customers can often buy a money order for just a few dollars or less. At the United States Postal Service, you’ll pay $1.25 for a money order of $500 or less and $1.75 for a money order of between $500 and $1,000. If you buy your money order at a retailer such as Walmart, you’ll likely pay less than one dollar.

Cashier’s checks tend to cost a bit more than money orders, but they’re still very affordable. Like money orders, cashier’s checks will vary in price depending on where you buy one. You can buy a cashier’s check for as little as $3 at a local credit union, while the bigger banks usually charge about $10. Some banks may offer free cashier’s checks and money orders if you have certain types of accounts at the bank.

Ready to start investing?
Sign up for Robinhood and get your first stock on us.Certain limitations apply

The free stock offer is available to new users only, subject to the terms and conditions at rbnhd.co/freestock. Free stock chosen randomly from the program’s inventory.

1233571

Related Articles

You May Also Like

The 3-minute newsletter with fresh takes on the financial news you need to start your day.
The 3-minute newsletter with fresh takes on the financial news you need to start your day.


© 2020 Robinhood Markets, Inc. Robinhood® is a trademark of Robinhood Markets, Inc.

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC provides brokerage services. Robinhood Securities, LLC, provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. ('Robinhood').

1200251