Both Cashier’s check and Money Orders are methods of money transfer chosen by a person depending upon the amount of money required to be transferred, the level of security involved and whether the person has access to a bank/bank account at that point in time.
Transfer of funds through a Money Order is quiet similar to making a payment through check. When a person buys a Money Order for making a payment or transferring money to someone, the person has to pay the full amount up-front. Thus the debit to the sender’s account happens prior to the money being received by the receiver. This is unlike a check payment where, the debit to the sender’s account happens at the time when the receiver cashes the check, not when the sender prepares the check.
Money orders can be bought from multiple outlets like post offices, gas stations, retailers, convenience stores etc. The upper limit of transferring funds through a Money Order is usually capped at about $1,000. To buy a Money Order a person needs to pay a small amount ranging from a few cents to a couple of dollars. It’s a very cost effective way of securely transferring money. A person does not need to have a bank account while purchasing a money order. Most Money Orders can be cashed at post offices or banks by the receiver. This is a very common instrument used be people for paying bills.
A Cashier’s check is another secure method of money transfer as it takes the payer out of the scenario completely. A request for issuing a cashier’s check has to be put to the bank by the payer. The payer’s bank then endorses the check as a guarantee to redeem the funds directly from the bank’s escrow account rather than the payers account. The bank deducts this money from the payers account at the time of purchase of the cashier’s check by the payer. Thus a cashier’s check is honored by the bank from its own reserves. Most banks charge a fees for issuing this kind of a check, which is usually a percentage of the entire amount. Mostly a person needs to have an account with the issuing bank for availing this type of a service. A cashier’s check will be issued by a teller only when the payer is present in person at the bank to make the request. Upon presenting the identification details, and confirmation from the teller that sufficient funds are available with the payer, a check is issued.
Mostly the funds from a cashier’s check is available for clearance the next day itself, but in certain cases and above certain threshold amounts, the bank holds the clearance of the check until it gets cleared from the issuing bank.
At a comparative level, a cashier’s check contains more security features that make counterfeiting rather difficult and goes a long way in preventing scam. In case a cashier’s check is lost, banks at times need the purchaser to get an indemnity bond for the amount of the lost check before issuing a replacement. This bond ensures the purchaser is liable for the replacement check.
A marked difference between cashier’s check and money order is that only banks or financial institutions can issue cashier’s check whereas a money order can be obtained for any outlet selling them like banks, stores, retail outlets etc.
Money orders are typically used for smaller denominations and comes with an upper capping, whereas cashier’s checks can be used for larger amounts at increased costs of money transfer.
Typically a person would choose to send across a cashier’s check over a money order incase the amounts involved are larger or there is a requirement of the increased security that is provided by a cashier’s check.