What is a money order? How it works and when you should use one

Have you ever seen an infomercial that said to "send a check or money order" to complete your purchase? Maybe you've noticed signs about the availability of money orders at the customer service desk at your local grocery store or post office. If you're of a certain generation, you may wonder: What is a money order?

Keep reading to learn about money orders, including how they work and why you may want to use one.

Introduction to money orders

Definition of a money order

A money order is a financial instrument that allows you to move funds. While you probably won't use money orders often, they can be extremely useful in certain situations, particularly if you need to send money to someone who doesn't have a bank account or need to send guaranteed funds.

Money orders are a more secure form of payment than standard checks because they're prepaid. When you go to a place that issues money orders, you'll have to pay for the entire money order amount up front. Money orders can't bounce when the payee goes to cash it, since it's already paid for.

How money orders work

A money order is essentially a check you can buy with cash. Once you have the money order, you can use it to purchase or send someone else funds.

You might consider using a money order for a payment where you want extra security, like a bill payment or an important purchase. Money orders often have a maximum amount, though, so if you want to pay for a big purchase, you should explore additional options, too.

If you get a money order, you can deposit one into a bank account by visiting a branch, using an ATM, or making a mobile check deposit. You can also cash a money order at your bank or post office for free, or at a grocery store or retailer, like Walmart, though there may be fees.

Advantages of using money orders

Security features

Money orders are best for purchases where you don't know the other person well. For example, many landlords require a money order or cashier's check for the first month's rent or after receiving a bad check. Unlike a personal check, the landlord can trust with nearly 100% confidence that the payment is good, as long as it's not fraudulent.

Money orders could also be good for large person-to-person purchases. If you are buying a car on Craigslist or another marketplace, the seller may want payment with cash or money order to ensure they actually get paid.

A money order can also give you a little more privacy than when you write a personal check, as it doesn't contain your full address or other personal information. It is safer to mail than cash, which also makes it popular for remote purchases that don't take place online.

Access for those without bank accounts

You don't need a bank account to get or cash a money order. Money orders can be purchased and cashed at the local post office or grocery store. A money order allows people without bank accounts to have access to a more protected form of payment.

How and where to purchase to buy a money order

You can buy a money order at your local post office, Walmart, or grocery store.

Money orders are issued through partnerships with major providers like Western Union and MoneyGram. When buying a money order, plan to pay with cash or sometimes debit, including a fee that is typically around $1 to $5 per money order.

Filling out a money order

To fill out a money order, write the payee information and sign it, just like a check from your own personal checkbook. The recipient will then endorse the back and deposit it like a check in their bank account, or cash it.

Because the money order is prepaid and coming from a trusted entity like Western Union or MoneyGram, there is virtually no chance it will bounce like a regular check. That is why a money order is often considered a more secure payment method than a check. Money orders also leave a paper trail that can act as proof of payment or proof of funds in the event of a future dispute.

Be sure to keep your receipt when buying a money order. If your money order is lost, you can generally get it replaced if it hasn't been cashed or deposited.

Receiving money orders

If you have a money order, you have a few options for cashing it.

The easiest option for most people is to make a mobile check deposit. Just like any other check, you can snap a picture to deposit it into your checking, savings, or another account. If you're not into mobile banking, you can also deposit it at an ATM or with a teller.

If you want to get cash for a money order, the best option is to take it to the issuer. Your bank may also be willing to cash a money order. Beware check-cashing services, as they charge extra to give you cash for your money.

Identifying fake money orders

Before you cash a money order, make sure it's real. The United States Postal Service, which issues money orders, says that there are currently only two approved designs for money orders.

One version has a green stripe at the top and at the bottom with a U.S. Mail eagle logo in the center. The other has red and blue coloring and subtle designs of an eagle head and an American flag. Both versions also have specific watermarks, which you can read about on the USPS website. To report a fake money order, call the Money Order Verification System at 866-459-7822.

Fees and limits

Comparison of money order fees by location

Here are some places you can generally get one and how much it may cost:

Maximum amount limits

Many money orders have a limit of $1,000. You could get several money orders if you need to move more than that.

However, you could also get a cashier's check instead. The difference between money orders and cashier's checks is that the latter doesn't typically have maximum amount limits.

Alternatives to money orders

Money orders were a popular way to pay for many years, but competing online products and other money order alternatives make them less common these days. Here are some alternatives to money orders to consider:

• Cash: While you might use plastic most of the time, good old cash is still a trusted payment method for many purchases.

• Online payment: Online payments using services like Venmo, Cash App, PayPal, Zelle, Google Pay, Apple Pay, and even Facebook Messenger offer options to connect to a bank account and send money to someone else using your phone or computer.

• Personal check: Personal checks don't offer privacy for the buyer or guaranteed funds for the seller, but they are usually free to use with the best checking accounts.
• Cashier's check: A cashier's check is even more secure than a money order and can be purchased with higher limits. However, there's usually a higher cost and you can generally only get them from a bank or credit union.

Money order FAQs