What Is a Money Order?

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

A money order is method of paying for something with cash using a check from a third party. You pay for the money order, the third party issues you a check that you can give or send to someone. This person deposits the money order in their bank account or exchanges it for cash at a business or post office.

A money order is a method of paying for something with cash using a check from a third party. You pay for the money order, and the third party issues you a check that you can give or send to someone. This person deposits the money order in their bank account or exchanges it for cash at a business or post office.

Learn more about how money orders work, and whether they make sense for you to use in a transaction.

Definition of a Money Order

A money order is a paper document, similar to a check, used as payment. You buy a money order by giving cash or other guaranteed funds to a cashier, plus a fee for the service. They print out the order, you fill out some information, and send or give it to whomever you're doing business with.

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.

How a Money Order Works

Like any other form of payment, there's two ways to look at how money orders work. First, how they work if you're paying with them, and second, how they work for someone receiving them as payment.

Paying With a Money Order

In order to make a payment using a money order, you would need to purchase one. You can buy a money order from several sources, including:

  • Supermarkets, such as Walmart, and convenience stores
  • Banks and credit unions
  • Check cashing, money transfer, and payday loan stores
  • U.S. Post Offices

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.

If you use your bank, you can transfer funds from your checking or savings account. At a retailer, you typically pay for a money order with cash or a debit card.

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, would would be required to sign the money order

Keep your receipt and any other details about your purchase. If something goes wrong, you’ll need that information to track or cancel the money order.

Getting Paid With Money Orders

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.

Pros and Cons of Money Orders

  • No bank account is needed

  • Safer alternative to checks

  • Offers anonymity

  • Some sellers demand them

  • Convenient for overseas transfers

  • 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, its 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.


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

  • Money orders are a payment method using prepaid checks from a third party, such as the U.S. Post Office, supermarkets and other financial institutions
  • Benefits of money orders include transaction safety, anonymity and convenience of international transfers
  • Drawbacks of money transfers include fraud, irreversible and limited value transactions, and longer transaction times

Article Sources

  1. Office of Inspector General, U.S. Postal Service. "Modernizing the Postal Money Order," Page 2. Accessed Feb. 15, 2022.

  2. Walmart. "Money Orders." Accessed Feb. 15, 2022.

  3. Chase Bank. "Additional Banking Services and Fees for Personal Accounts." Page 7. Accessed Feb. 15, 2022.

  4. United States Postal Service. "Sending Money Orders." Accessed Feb. 15, 2022.

  5. Western Union. "How to Fill Out a Money Order." Accessed Feb. 15, 2022.

  6. United States Postal Service. "Sending Money Internationally." Accessed Feb. 15, 2022.

  7. Bank of America. "Mobile Check Deposit FAQs." Accessed Feb. 15, 2022.