Comparison Table: Cashier's Check vs Money Order (Issuer, Cost, Security, Uses)
Understanding the difference between cashier's checks and money orders is crucial for Commerce students, business professionals, and anyone preparing for banking or competitive exams. These secure, prepaid payment methods are often tested in exams and are essential knowledge for real-life financial decisions.
| Feature | Cashier's Check | Money Order |
|---|---|---|
| Issued By | Banks and credit unions | Post offices, retailers, financial institutions |
| Security | Bank-guaranteed funds, cannot bounce | Prepaid, but not bank-guaranteed |
| Cost | Rs. 100–500 in India; $5–$15 in the USA | Rs. 10–25 in India; $1–$2 in the USA |
| Maximum Amount | High (Often no set maximum) | Lower (Usually up to Rs. 10,000–50,000 or $1,000) |
| Best For | Large, important transactions (house, car, business deals) | Smaller, routine payments (rent, bills, sending money abroad) |
| Where to Get | Banks, credit unions (you may need an account) | Post office, convenience stores, banks, retail shops |
Difference Between Cashier's Check and Money Order
The difference between cashier's check and money order mainly lies in who issues them, their maximum limits, cost, and the level of security they provide. Both are safe payment options, but their best uses vary depending on the transaction's size and importance.
What is a Cashier's Check?
A cashier's check is a secure payment instrument issued by a bank or a credit union. The money is withdrawn from the buyer’s account (or given in cash) and kept aside by the bank, which then writes and signs the check itself. Since the funds are guaranteed by the bank, cashier’s checks are considered highly reliable, especially for large transactions where security is vital.
How to Get and Use a Cashier’s Check
- Visit a bank or credit union branch.
- Provide the amount and recipient’s details.
- Pay the total amount (plus any service fee).
- The bank signs and issues the check, guaranteeing the funds.
Cashier’s checks are commonly used for things like buying a car, making a down payment on a house, high-value online purchases, or settling important business deals.
What is a Money Order?
A money order is a prepaid payment document available at post offices, certain banks, and many retail stores. You pay the amount up-front (cash, card, or debit), and the issuer provides a money order form with details filled in. Money orders are safe for moderate amounts and are often accepted in places where personal checks are not trusted.
How to Get and Use a Money Order
- Go to the post office, bank, or shop offering money orders.
- Pay the amount and a small service fee.
- Fill out your and recipient’s details on the form.
- Give the money order to the payee as proof of guaranteed payment.
Money orders are widely used for rent payments, sending money home or abroad, paying utility bills, or making purchases from people you don’t know well.
When to Use Cashier’s Check vs Money Order
- Cashier’s Check: For large payments, buying assets (house, car), real estate transactions, or deals where extra security and high value are involved.
- Money Order: For smaller payments, rent, sending money to family, paying bills, or for people who do not have a bank account.
Choosing the right instrument depends on the transaction value, required security, and the recipient’s preferences.
Real-Life Examples
- Buying a used car from a dealership: Use a cashier’s check—it shows verified funds and is trusted for large amounts.
- Paying monthly house rent to a landlord who doesn’t accept online transfers: A money order is ideal—safe and easy to track.
- Online second-hand furniture purchase with a stranger: To be cautious, a cashier’s check adds more security.
- Sending Rs. 8,000 to a relative in a rural area: Money order is suitable.
Why are These Differences Important in Commerce?
Understanding the difference between cashier's check and money order helps students avoid errors in exams and real banking scenarios. Many competitive and academic exams test this knowledge using case studies or situational questions. In business practice, the right choice reduces risk and increases trust between parties.
Related Concepts and Further Learning
- Negotiable Instruments – Learn the broader category including checks, bills, and promissory notes.
- Types of Cheque Crossing – Understand security features for checks.
- Bank Reconciliation – See how such instruments are recorded in financial statements.
- Functions of Commercial Banks – Explore all services banks offer, including issuing cashier’s checks.
At Vedantu, we break down such topics with exam-focused clarity to make your commerce studies easier. For more detail, refer to lessons on Financial Markets or Functions of Financial Management.
In summary, knowing when to use a cashier’s check or money order is a practical skill and a common exam topic in Commerce. Cashier’s checks provide bank-backed security for large transactions, while money orders are a convenient, affordable option for smaller, everyday payments. These basics help you handle financial actions confidently and responsibly.
FAQs on Difference Between Cashier's Check and Money Order Explained
1. What is the main difference between a cashier's check and a money order?
The main difference between a cashier's check and a money order lies in their issuer and typical use. A cashier's check is a check drawn by a bank on its own funds, guaranteeing payment. A money order is a form of payment, often purchased at a post office or other retailers, which acts as a prepaid payment instrument. Cashier's checks are usually used for larger transactions requiring greater security, while money orders are better suited for smaller payments.
2. Which is safer: cashier's check or money order?
Both cashier's checks and money orders offer a degree of security, but cashier's checks are generally considered safer because they are drawn directly from a bank's account. Money orders, while offering some protection, can potentially be lost or stolen before being cashed. The risk is less compared to cash, but higher than a cashier's check.
3. How much do cashier’s checks and money orders cost?
The cost of a cashier's check or money order varies depending on the financial institution or retailer. Banks typically charge a small fee for cashier's checks, often ranging from a few dollars to ten dollars depending on the amount. Money orders also usually involve a small fee, which might be lower than for a cashier's check, but the precise amount depends on the provider. Always check the individual fee schedule.
4. Where can I get a cashier’s check or a money order?
You can obtain a cashier's check directly from a bank or credit union where you have an account. Money orders are available from various sources, including post offices, some banks, retail stores (like supermarkets and pharmacies), and check-cashing businesses. The availability varies based on your region.
5. Which has a higher maximum limit: money order or cashier’s check?
Generally, cashier's checks have higher maximum limits than money orders. While the exact limits vary based on the issuing institution, you can typically purchase a cashier's check for significantly larger amounts than a money order. Money orders usually have a limit on the amount that can be purchased for a single transaction.
6. When should I use a money order instead of a cashier's check?
Use a money order instead of a cashier's check when dealing with smaller transactions or when a cashier's check is unavailable. Money orders are convenient for payments that don't require the highest level of security, such as paying bills, rent, or making online purchases where smaller amounts are involved. A cashier's check is usually preferred for high-value transactions, large purchases, or when maximum security is needed.
7. What's better, cashier check or money order?
The 'better' option between a cashier's check and a money order depends entirely on the context. For high-value transactions needing guaranteed payment and increased security, a cashier's check is preferable. For smaller, everyday payments where convenience and lower cost are priorities, a money order might be more suitable. Consider the transaction amount, security needs, and availability when making your decision.
8. How much does a cashier's check cost?
The cost of a cashier's check varies by bank and the amount of the check, but generally involves a small fee, often a few dollars. Check with your bank for the specific cost in your area.
9. Why use a cashier's check?
Use a cashier's check when you need a guaranteed form of payment for a significant transaction. It offers greater security than a personal check because the bank verifies the funds before issuing it. This is beneficial for large purchases, paying deposits, or any scenario requiring high assurance of payment.
10. What is the maximum amount for a cashier's check?
The maximum amount for a cashier's check isn't universally fixed; it varies depending on your bank's policies and your account standing. However, generally banks allow considerably larger amounts than for money orders. Inquire at your bank for precise information.
11. What is the difference between a bank money order and a cashier's check?
A bank money order functions similarly to a money order obtained from other sources but is issued by a bank. The key difference between a bank money order and a cashier's check lies in their nature. A cashier's check is essentially a bank check, while a bank money order is a type of prepaid payment order, offering a slightly different level of security and transaction limits.
12. What is better a certified Cheque or money order?
A certified check and a money order both provide more security than a personal check, but a certified check offers a higher level of guarantee. A certified check is essentially a personal check that the bank verifies and guarantees payment for. A money order is a separate payment instrument bought from the bank or other retailers. Choosing between them depends on the transaction amount and the need for guaranteed funds.
