A money order is a certified form of payment that works like a check, but the funds don’t come from your account. You prepay the entire value of the money order with cash or a debit card, so the recipient knows it’s guaranteed to clear. Money orders come in handy when you need a secure way to send or receive money, although you may have to pay a small fee.
Money orders, explained
Money orders are a form of payment that functions like a prepaid check. After providing some information and paying the face value of the money order, you’ll receive a paper copy to hand to the recipient. That person then cashes the money order, like they would a check.
A Money order can be beneficial because it’s safer than carrying or sending cash and doesn’t require a bank account. And because the issuer has already received the money, “the dollar amount written on the money order is guaranteed to the recipient,” said Mark Kinsella, a certified financial planner and founder of Family Financial Planning Services. “The money order will not bounce due to non-sufficient funds.”
However, there are drawbacks to consider.
These transactions typically come with dollar limits, aren’t reversible and might not be accepted everywhere.
How money orders work
When you buy a money order, you’ll pay the entire face value upfront along with a fee and hand the paper copy to the recipient. This makes the payment more secure than cash, and it’s guaranteed to clear, unlike a check.
You’ll need the following details for the order:
- Recipient’s name and address.
- Amount you’re paying.
- Your name and address.
If you’re unsure where any of the information goes, ask the person selling the money order for guidance.
The amount you can buy varies with each location, but domestic money orders are usually capped at $1,000. Using cash, a debit card or a traveler’s check, you’ll pay the full amount of the money order. (You typically can’t pay with a credit card.) Most issuers also charge a small fee that’s either a set amount or a percentage of the face value.
When you’re done with the transaction, take your copy of the money order and either hand deliver it or mail it to the recipient. Keep your receipt so you have a record of payment. You can also use the serial number on your receipt to track the status of the money order and make sure the recipient cashes it.
Where to get a money order
To buy a money order, head to a location that sells them. You can find them at:
- The United States Postal Service (USPS).
- Some banks and credit unions.
- Some retailers, such as grocery stores and convenience stores.
- Check cashing and payday loan stores.
If you’re not sure if a certain place sells money orders, call ahead of time or check their website. Some locations may sell a money order but not cash them, or vice versa.
Why you’d need a money order
While you may be in the habit of using credit cards, peer-to-peer payment apps and checks when you need to pay for something, there are reasons to use money orders. You might choose to use a money order if:
- You don’t have a bank account. For those without access to bank services, money orders provide a way to pay a bill or send money to someone.
- You’re sending payment by mail. Unlike a personal check, “money orders don’t include your banking information, so these details stay safe,” said Jim Jacobucci, a certified financial planner and personal financial coach at Financial Finesse.
- You’re sending money internationally. Money orders can be an easy and secure way to send money abroad, though you may have a lower limit compared to domestic money orders.
Money order vs. a cashier’s check
Money orders and cashier’s checks are both guaranteed forms of payment in paper form. But while a money order is funded directly by your prepayment, a cashier’s check is drawn against the issuing bank’s account.
When you go to a bank and ask for a cashier’s check, the bank first determines you have the amount available in your account. The bank then transfers the money from your account to their own, and prints the cashier’s check with the recipient’s name and the amount to be paid.
Money orders may be more convenient because “cashier’s checks are generally only available at banks and credit unions,” Jacobucci said. But “if you are looking to send a larger sum of money, you might choose a cashier’s check for the generally higher limits allowed.”
How to cash a money order
If you receive a money order, you can cash it at a post office, bank or a store that handles this type of payment. Take a copy of your government-issued ID to prove you’re the recipient named on the money order. You’ll sign the back of the document — but not until the cashier asks you to.
How long is a money order good for?
Domestic money orders generally don’t have an expiration date. They also don’t accrue interest, so they can’t be cashed for more than their face value. However, issuers may start adding service fees if a money order goes uncashed for a year or more. Check the terms and conditions on the order if you’re unsure.
Alternatives to a money order
If you need to send money to someone, pay a bill or make purchases, here are some alternatives to cash and money orders:
- Wire transfers: A wire transfer electronically moves money from your bank account to another. They’re typically more expensive than sending personal checks, cashier’s checks or money orders — but safer because they’re initiated by an authorized person at a financial institution.
- Personal check: Writing a paper check that’s processed from your checking account “can be appropriate for most straightforward transactions,” Jacobucci said.
- Prepaid debit card: If you don’t have a checking account, you can load money onto a prepaid debit card and use it to pay bills and make purchases. Many prepaid cards come with fees, so you’ll need to compare options to see what’s right for you.
Frequently asked questions (FAQs)
When you buy a money order, you’ll pay the full face value of the order plus a small fee, usually a few dollars.
A money order is a paper certificate that includes the name and logo of the issuing financial institution. The front of a money order typically includes a serial number and empty fields for the payer’s name, address and signature along with the payee’s name and address. The back of a money order is mostly blank and includes space for the payee’s signature.
The design on a money order may vary with each issuer. For instance, the USPS money order includes small watermarks of Ben Franklin on the left side and colorful weaving on the right.
Money orders include blank fields that are labeled, so you’ll know where to put the information. The labels may vary with each issuer, but they typically include the following:
- “Pay to” or “Pay to the order of”: Write the recipient’s name (whether it’s an individual or business) here with their address.
- “Memo” or “Payment for”: Make a note of what the payment is for. If you have an account with the recipient, include your account number on this line.
- “From,” “Purchaser” or “Sender”: Write your name here along with your address.
- Signature: Sign your name in the blank signature field on the front of the money order. The recipient signs the back, so leave that blank.
Money orders are safe because “unlike cash, only the intended recipient can use it,” Jacobucci said. However, he adds, “money orders are still susceptible to scams.”
As the recipient, you can avoid money order fraud by calling the phone number or visiting the website listed on the money order to verify the funds. Also look for signs of forgery, such as misspellings or alterations to the payment amount. It’s also wise to cash or deposit the money order as soon as you receive it. As a purchaser, you should hold onto your money order receipt until it’s been deposited or cashed.
