What Is a Money Order?

Man stands at bank teller paying for a money order with cash
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DEFINITION

A money order is a safer alternative to cash that you can pay for with cash, a debit card, or other guaranteed funds. It's a certificate that can be deposited in your bank account or exchanged for cash.

Definition of a Money Order

A money order is a lot like a prepaid check. You can buy one using cash or other guaranteed funds, and you'll also have to pay fee for the service. The seller will print out the order, which you'll then fill out with the name of the money order recipient and additional details. Some sellers may require you to add your name, signature, or address.

In 1864, money orders were introduced by the U.S. Postal Service as a secure way for soldiers and citizens to send money over long distances for a nominal fee. Prior to that, cash sent via mail was often stolen.

A series of circular icons, including a hand holding money, a person holding a finger to their mouth, a bank, a globe, and a check, representing the title: why use money orders? some sellers won't take checks, good way to send money overseas, no bank account needed, safer than cash, keeps your info secret

The Balance / Ashley DeLeon

How Money Orders Work

A money order is an alternative to cash or checks. Like a check, a money order is designed to be sent to a specific person, and cannot be cashed or deposited by anyone. Unlike a check, a money order is paid for in advance, so it's guaranteed. You can use a money order to purchase items, pay bills, or just send money to someone - locally or internationally.

If you're the one sending the money order, you'll typically need to buy it in a physical location and then deliver it in person or send it in the mail. If you're receiving the money order, you can cash or deposit it in person at most banks, or deposit it online at some banks.

Where Can You Buy a Money Order?

You don't have to go to a bank or credit union to find a money order. There are a number of places you can buy one, including:

  • All U.S. Post Office locations
  • Banks and credit unions
  • Check cashing, money transfer, and payday loan stores
  • Some convenience stores and supermarkets, like Walmart

How To Buy a Money Order

You can buy a money order with cash or a debit card, or by transferring funds from your checking or savings account. Although you generally can't buy a money order online, there are many other ways to send cash directly to someone else from your phone or computer.

Although you can buy as many money orders as you want on a given day, if you spend more than $3,000 on money orders in a day, you'll need to bring an acceptable ID and complete a special form.

Once you've purchased the money order, you'll need to fill in information for the sender and the recipient. Typically, money orders require the sender's name and depending on the financial institution issuing the money order, the sender's address. You would also need to fill in the name of the payee or the recipient and their address. Lastly, as the sender of the money order, you would would be required to sign the money order.

Can You Buy a Money Order With a Credit Card?

You typically can't buy a money order using a credit card. However, if you find a seller that is willing to accept a credit card, the payment will usually be treated as a cash advance. Cash advances can be extremely expensive. There's usually a fee of around 5% of the amount you take out, and the interest rate will most likely be higher than your usual credit card interest rate.

How Much Does a Money Order Cost?

When you buy a money order, you'll need to pay a small fee in addition to the cash amount of the money order. For example, if you buy a $250 money order from the USPS, you'll need to pay a fee of $1.45. That means the total cost of the money order is $251.45.

Convenience and cost may dictate where you buy. Prices are typically lowest at the Post Office, supermarkets, and convenience stores—around $1 per money order. Banks and credit unions may charge up to $5 or more.

Money orders have a maximum limit, often $1,000 per money order.

Best Times to Use a Money Order

Although credit cards, checks, and apps like PayPal and Zelle are widely used as payment methods, there are some times that it might be best to use a money order instead.

You might prefer to use a money order if:

  • You don't have a bank account, but want a safer alternative to cash.
  • You don't want your payment connected to your bank account or credit card. 
  • You want to send money internationally.
  • You’re required to use a money order to make a purchase.

Where to Cash a Money Order

If you receive a money order, you can cash it or deposit it just like a check. You should carry a proof of your identity when you're cashing a money order. Similar to a check, you sign the back of the money order.

According to the USPS, you should only sign the money order in front of the the cashier when you're cashing the money order. Do not sign the money order beforehand.

It’s best to cash money orders at the same company or entity they were bought from, such as Western Union, a MoneyGram desk, or the bank or credit union that issued it. Money orders reduce risk for recipient because their issuers demand the payment upfront, and so they shouldn’t bounce—as personal checks might.

If you don’t need cash right now, it’s wise to deposit the funds to a bank account as soon as possible. It's easy to misplace, lose, or forget it for a while.

What Happens If I Lose a Money Order?

You may be able to get a refund, depending on where you purchased your money order. You'll most likely need to pay a non-refundable processing fee in order to replace or refund the money order. The process differs depending on where you purchased your money order.

You'll typically need to fill out a form and provide proof of purchase, and the seller may be able to replace your money order or offer you a refund. Reach out to the seller and see what steps you can take to get a refund or cancel your money order.

Pros and Cons of Money Orders

Pros
  • No bank account is needed

  • Safer alternative to checks

  • Offers anonymity

  • Some sellers demand them

  • Convenient for overseas transfers

Cons
  • Transaction not reversible

  • May be prone to scams

  • Limit on transaction amount

  • Not accepted everywhere

  • Transactions take longer time

Pros Explained

  • It's a safer alternative to cash: A money order can be made payable to a specific person or organization, which reduces the risk of theft. If a money order is lost or stolen, you can cancel it and get a replacement. If you lose cash, it’s gone for good, and mailing cash is too risky.
  • No bank account is needed: If you don’t have a bank account or don't want to use one, money orders are useful for making payments. You don't need a bank account to get a money order.
  • They offer anonymity: When you write a personal check, that check contains sensitive information. For example, checks often show your home address, phone number, bank account numbers, and the names of any joint account owners (such as a spouse or partner). If you don’t know or trust the person you’re paying, a money order only gives someone your name and money.
  • A seller might require one: Some sellers demand that you pay with a money order if they prefer not to take the chance of accepting a personal check. 
  • They are convenient for sending money overseas: If you need to send funds abroad, money orders are a safe and inexpensive way to do so. The recipient can easily convert a money order to local currency, and USPS money orders are well-regarded in numerous countries worldwide.

Cons Explained

  • Transaction not reversible: You cannot stop payment on a money order, you can only cancel money orders before they’ve been cashed.
  • May be prone to scams: Though considered safe, money orders may be susceptible to scams. Always verify funds on any money order that you have doubts about before you take it to your bank.
  • Limits on transaction amount: The relatively low maximum value of $1,000 (or $700, in the case of international USPS money orders) limits what you can use money orders for.
  • Longer transaction time: Money orders tend to take more time, even when it's easy to find somewhere to buy them. You may need to get cash, wait in line, wait for a customer service representative to complete the transaction, and get the money order into the mail.
  • Not accepted everywhere: Money orders are generally considered safe, but some financial institutions (like insurance companies and brokerage firms) don’t accept them. Mobile banking is very popular and convenient currently, but banks might not allow you to use your mobile device to deposit money orders, even though they accept written checks.

Do I Need a Money Order?

Money orders are one among many forms of payments. While they do offer certain benefits such as safety, privacy and convenience, it's up to you to decide whether going through the process of buying the money orders is worth the time and effort.

Money Order Alternatives

Among other payment options that offer “guaranteed” funds, and some are even safer than money orders.

Cashier's Check

It's important to fill out a money order correctly. Tell the money order issuer how much you’d like the money order to be for, and they print it for you. You need to write in the name of the entity you're paying on the line that says, “Pay to the order of.” You must sign it, or the person trying to cash it will not be able to use it.

Cashier’s checks are similar to money orders. They’re also paper documents issued to a specific payee and guaranteed by the issuer. However, only banks and credit unions issue cashier’s checks. Convenience stores and money shops or the financial firms they partner with usually don't. Also, if you need more than $1,000, cashier’s checks can be made out for more than money orders.

Wire Transfers

A wire transfer is an electronic transfer of guaranteed funds. Again, sellers can be confident that they will receive the money they've been promised. Wire transfers are more expensive (about $30 to $40 in many cases) and more cumbersome, but they can’t be faked or canceled like money orders.

You can pay utility bills, insurance premiums, and mobile phone charges with money orders. However, the fees and time it takes to buy them add up over time.

Electronic Payments

Electronic payments of non-guaranteed funds are also an option. If you’re paying bills, your bank’s online bill payment service can send funds almost anywhere—often for free. Even if you don’t have a bank account, many prepaid debit cards offer the same service, or you can pay using your card number.

Online services and apps can also send money at no charge. However, it helps to be cautious when using electronic payments because information can be tracked.

Checks

Personal checks, while old-fashioned, are often good enough. Billers like utility companies and phone service providers still accept personal checks. However, online retailers might not accept them, instead requesting a money order or other payment method.

Key Takeaways

  • A money order is essentially a prepaid check that you can buy using cash, a debit card, or other guaranteed funds.
  • You can get a money order at your bank, other financial institutions, the U.S. Post Office, and even some supermarkets and convenience stores.
  • Money orders are safe, anonymous, and a convenient way to send cash to another country.
  • Money orders are not accepted by all financial institutions, you have to buy them in person, and you can only send up to $1000 per money order.

Frequently Asked Questions

How Do You Fill Out a Money Order?

In order to fill out a money order, you'll need to provide the recipient's name. You may also be required to fill out your name, provide your address, sign the money order, and provide additional details.

Where Can I Get a Money Order?

You can buy a money order at a number of locations, including the USPS, supermarkets, convenience stores, banks, and credit unions.

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Article Sources

  1. Office of Inspector General, U.S. Postal Service. "Modernizing the Postal Money Order," Page 2.

  2. Walmart. "Money Orders."

  3. USPS. "Money Orders - The Basics."

  4. Western Union. "How to Fill Out a Money Order."

  5. Chase Bank. "How do credit card cash advances work?"

  6. Chase Bank. "Additional Banking Services and Fees for Personal Accounts." Page 7.

  7. United States Postal Service. "Sending Money Orders."

  8. United States Postal Service. "Sending Money Internationally."

  9. Bank of America. "Mobile Check Deposit FAQs."