How to Protect Yourself From Money Order Scams
Money order scams are common when buying or selling online. Before handing over merchandise or money, be sure you’re dealing with a legitimate buyer—and be especially careful if somebody asks you to send money after they pay you with a money order.
Fake money orders are the most common type of scam, as sellers ship goods or wire money to a “buyer” who is really a con artist. By the time the bank discovers the problem, it’s too late to recover products or funds. But you can also get ripped off when you’re the one sending a money order.
Why Money Order Scams Work
Money orders are often a safe way to receive payments—when they’re legitimate. Unfortunately, that reputation for safety can cause recipients to drop their guard. These scams work because you believe that you’ve been paid and that money orders are as good as cash. In fact, you should always treat money orders with caution, the same as you would with personal checks and other types of checks.
Typical Money Order Scams
"Excess" scams: A typical approach involves an inquiry from somebody far away—another state or country. The person agrees to buy your item, but when the payment arrives, it’s a money order for much more than it should be. Why did they overpay? The buyer will ask you to send the excess money—above and beyond your sale price—somewhere else. Perhaps you’re supposed to send the funds to an expensive shipper who handles overseas transactions. Alternatively, the buyer will ask you to refund the excess amount, usually by wire transfer or through a money transfer service, because he couldn’t get a money order for the correct amount.
Either way, you’ll lose that money for good if you go along with the buyer’s instructions.
Purchase scams: Sometimes a money order scam is much simpler: you just receive a fake money order and ship your merchandise. Buyers don’t ask you to send cash, but they get the goods for free.
Deposit scams: In these cases, somebody asks you to deposit or cash a money order for them. The person, the story goes, doesn't have a bank account yet, and she doesn't want to pay steep fees at a check cashing store. Instead, she would like to sign the money order over to you and possibly even pay you for your time. What could go wrong? Surprisingly, your bank might let you walk out with cash, but that's not the last you'll hear of this money order.
Payment processing: A variation on the deposit scam is the payment processing scam. You’ll think you got a work-from-home job depositing payments or mystery shopping, and your job is to accept money and forward the payments. In some cases, you’re actually helping criminals launder money while you get ripped off.
Security deposit: If you manage a property, you may hear from potential renters out of state. They’ll send a money order for their first and last month of rent, along with a security deposit. However, they’ll quickly inform you that plans changed—perhaps the jobs they were moving for fell through—and they no longer want to rent the property. They’ll graciously offer to let you keep the rent, but they’d like you to return the security deposit.
Infinite varieties: Thieves are creative, and they use money orders in scams in endless ways. Watch for the red flags described here, and trust your gut. If something seems a little bit too easy or too good to be true, pause before sending money and get more information.
Where Things Fall Apart
If you send or spend money that you believe you got from a money order, expect problems with your bank. When you deposit a money order into your account, your bank will allow you to use some or all of the deposit immediately (typically the first $200, but it could be more, especially with U.S. Postal Service money orders). However, the bank has not yet collected the funds from the money order issuer; that process takes a few days or weeks.
When your bank tries to collect the funds—from Western Union, for example— the bank will find out that it has a bogus money order. Because the bank won’t receive any money, they’ll deduct the fake deposit from your account. If your account is empty, your account balance will go negative and you’ll have to repay the bank. Plus, your checks will bounce, and your debit/ATM card will temporarily become worthless if you were running low on funds.
If all of this sounds familiar, thieves use the same approach with cashier's checks.
What can you do to protect yourself from money order scams?
Unknown buyers: The safest approach is to only accept payments from people you know and trust. But if you want to work with new customers or sell online, you may have to expose yourself to some risk. Fortunately, red flags and behavioral cues can help you manage your risk.
Red flags: You’ll be able to spot most money order scams a mile away if you pay attention. But when life gets busy, it’s easy to miss a detail and forget how these scams work and that they even exist. A major red flag—and something you should agree to—is a request to send or wire money after you’ve been paid with a money order. Check this list and see if anything looks familiar to you:
- A request to send or wire money that was paid to you with a money order.
- An offer that came from out of the blue (how did this generous, trusting person find you?).
- International money orders (although fake USPS money orders are also a problem).
- Messages with numerous grammar and spelling mistakes.
- Refusal to pay you electronically (they can’t wire money or use an online service).
- Your buyer is not interested in checking out the merchandise or product details, and he doesn't seem to know anything about what he's buying.
- Your buyer asks for sensitive information like your bank account number.
- It sounds too good to be true.
Verify funds: Always verify funds when you’re paid with a money order. Call the money order issuer and check to see if you’ve got a legitimate document. You can never be 100 percent certain, but you can improve your chances.
Security features: Each money order issuer can also describe the latest security features printed on their money orders. For example, USPS money orders in 2017 feature a Ben Franklin watermark, while MoneyGram uses a heat-sensitive patch to reduce fraud.
Delay spending: If you have any doubt, don’t spend the money you receive from a money order. Treat it as suspect or be prepared to repay your bank. It can take weeks or months for the bank to figure out that you’ve deposited a bad money order. Most of the time you’ll find out about fraudulent items within a few weeks, but it can take longer.
Feel free to ask your bank for help. They’ve seen money order scams before and can talk about any suspicious transactions with you.
Paying With Money Orders
The most common scams start with a payment you receive, but it’s also possible to lose money when you’re the one paying.
Advance payment: The most basic type of scam happens when you send a payment and don’t get anything in return. Sellers are eager and communicative when discussing payment, but they disappear after you send funds with a money order. Unfortunately, money orders don't have buyer protection or the ability to reverse charges. In some cases, you can cancel a money order, but the process is cumbersome and costs money.
Helping hand: Money orders and money transfers are often part of “helping” scams. Somebody asks you to send funds, and they cash the money order before you realize that you were ripped off. These scams come in several varieties, including
- Friends and loved ones trapped overseas (their wallet got lost or stolen, so they’re emailing or asking on social media).
- Romance scams (you develop affection for somebody online, and the person asks you to help with bills or an emergency).
- Debt collection (somebody calls with threats of jail time or other harsh consequences, but you can put the problem behind you if you pay now).
Before you send money, talk about the situation with somebody you know and trust. Soliciting input or another perspective can help you evaluate your risk. If you decide to move forward with the payment because you want to help, you’ll have a better idea of what you’re getting into.