Money Order Basics

Where and How to Buy One

Illustration depicting reasons to use money orders.

Ashley DeLeon @ The Balance 

Whether you’re buying or selling something, you may want to use a money order for payment. Maybe you don’t have a bank account, want to make sure cash doesn’t get lost in the mail, or don’t want to risk a personal check bouncing. 

Generally, those are all good reasons to use a money order. It’s a safe form of payment and a popular alternative to a check, especially if you want to keep your personal information private but still provide funds that are guaranteed. Here’s what you need to know to use one and when other payment methods may be a better choice.

What Is a Money Order?

A money order is a paper document, similar to a check, used as a form of payment. You buy a money order by prepaying the amount printed on the face of the money order with cash or another form of guaranteed funds. Then, all you need to do is fill out a few pieces of information.

Safe for Buyer and Seller

  • The name of the payee (the recipient) and the name of the financial institution that issued the money order appear on every order. When you buy one, you specify who should receive the funds by filling in the name of the person or organization that you wish to pay. That makes it difficult for thieves to steal it and get the money.
  • Because issuers of money orders demand the payment upfront, they shouldn’t bounce—as personal checks might. If you are the recipient, you cash or deposit a money order much like a check, but with less risk.

Where and How to Buy Them

Where

You can buy a money order from several sources, including:

  • Supermarkets 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 or so per money order. Banks and credit unions may charge $5 to $10.

Money orders have a maximum limit, often $1,000 per money order. For large purchases, a cashier’s check may be a better option.

How

At 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 transaction using your PIN.

It's important to fill out a money order correctly. Tell the money order issuer how much you’d like a money order for, and they print the document for you. You need to write in the name of your payee on the line that says, “Pay to the order of.” And don’t forget to sign it.

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.

If You’re the Recipient 

If you receive a money order, you can cash it or deposit it just like a check. To do so, you generally endorse the back of the money order by signing your name. It’s best to cash money orders at the same location they were bought from (a Western Union or MoneyGram desk, or the bank or credit union that issued them, for example).

If you don’t need cash right now, it’s wise to deposit the funds to a bank account. Doing so keeps the money safe, and you can earn interest on your savings.

Why Use Money Orders?

Here’s why you may want to use a money order:

  • 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 gets lost or stolen, you can cancel it and get a replacement. If you lose cash, it’s gone for good, and mailing cash is simply too risky.
  • No bank account needed: If you don’t have a bank account—whether you don’t want one or you can’t qualify for one—money orders might be a useful tool for making payments. You don't need a bank account to get a money order.

You can pay bills like utility bills, insurance premiums, and mobile phone charges with money orders. However, the cost adds up, as does the time it takes to buy them month after month. Consider opening a bank account if you don't have one.

  • Offers 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 your spouse or partner, if any). If you don’t know or trust the person you’re paying, a money order hides that information.
  • May be required by seller: Some sellers demand that you pay with a money order if they prefer not to take the chance of accepting a personal check. 
  • 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 around the world.

Limitations of Money Orders

Money orders are generally issued with a maximum value of $1,000 (or $700, in the case of international USPS money orders). They are also a little bit of work, even if they’re easily found. 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.

Plus, while money orders are generally considered safe, some financial institutions (like insurance companies and brokerage firms) don’t accept them because they can be used in money laundering operations. Likewise, banks might not allow you to use your mobile device to deposit money orders, even though checks are no problem.

Alternatives to Money Orders

Other options offer “guaranteed” funds, and some are even safer than money orders.

Cashier’s Checks

Cashier’s checks are similar to money orders. They’re also paper documents issued to a specific payee and guaranteed by the issuer. However, banks and credit unions issue cashier’s checks, not convenience stores and money shops (or financial firms they partner with). Also, cashier’s checks are available for larger dollar amounts, so they’re a better choice for large payments. Learn more about how cashier’s checks compare to money orders.

Wire Transfers

A wire transfer is an electronic transfer of guaranteed funds.11 Again, sellers can be confident—even more confident than if they receive a money order—that they’re getting paid. 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.

Electronic Payments

Electronic payments of non-guaranteed funds are also an option. If you’re just paying bills, your bank’s online bill payment service can send funds almost anywhere—often for free.13 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 (preferably only to people you trust) at no charge.

Checks

Personal checks, while old-fashioned, are often good enough. Billers like utility companies and phone service providers still accept personal checks. Online sellers and might request a money order for added security.

Watch for Scams

Money orders are traditionally considered safe, but they can be used in fraud. In fact, the perception that they are safe is exactly what makes them perfect for scams.

Watching for common red flags can help you avoid trouble. To be safe:

  • Never send “extra” money back to somebody who pays too much with a money order—it’s almost certainly a scam. Be wary of forwarding extra money to “shippers.”
  • Verify funds on any money order that you have doubts about before you take it to your bank.
  • Avoid paying anybody with a money order if you think you’ll ever need to reverse the payment. You can only cancel money orders before they’ve been cashed.

Article Sources

  1. Western Union. "All About Money Orders." Accessed May 15, 2020.

  2. United States Postal Service. "Modernizing the Postal Money Order," Page 8. Accessed May 15, 2020.

  3. Chase Bank. "Additional Banking Services and Fees for Personal Accounts." Page 7. Accessed May 15, 2020.

  4. United States Postal Service. "Sending Money Orders." Accessed May 15, 2020.

  5. Capital One. "What Is a Cashier's Check?" Accessed May 15, 2020.

  6. United States Postal Service. "Domestic Money Orders." Accessed May 15, 2020.

  7. MoneyGram. "I Received a Money Order, Where Can I Cash It?" Accessed May 15, 2020.

  8. Western Union. "How to Fill Out a Money Order." Accessed May 15, 2020.

  9. United States Postal Service. "Sending Money Internationally." Accessed May 15, 2020.

  10. Capital One. "What Is Mobile Deposit?" Accessed May 15, 2020.

  11. Bank of America. "International Wire Transfers." Accessed May 15, 2020.

  12. Venmo. "Fees." Accessed May 15, 2020.

  13. Federal Trade Commission. "Using Money Transfer Services." Accessed May 15, 2020.