Emily Guy Birken is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial top.
Emily Guy Birken ContributorEmily Guy Birken is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial top.
Written By Emily Guy Birken ContributorEmily Guy Birken is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial top.
Emily Guy Birken ContributorEmily Guy Birken is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial top.
ContributorManaging Editor, Global Data and Automation for Forbes Advisor. Mitch has more than a decade of experience as personal finance editor, writer and content strategist. Before joining Forbes Advisor, Mitch worked for several sites, including Bankrate, I.
Managing Editor, Global Data and Automation for Forbes Advisor. Mitch has more than a decade of experience as personal finance editor, writer and content strategist. Before joining Forbes Advisor, Mitch worked for several sites, including Bankrate, I.
Managing Editor, Global Data and Automation for Forbes Advisor. Mitch has more than a decade of experience as personal finance editor, writer and content strategist. Before joining Forbes Advisor, Mitch worked for several sites, including Bankrate, I.
Managing Editor, Global Data and Automation for Forbes Advisor. Mitch has more than a decade of experience as personal finance editor, writer and content strategist. Before joining Forbes Advisor, Mitch worked for several sites, including Bankrate, I.
Updated: May 5, 2023, 2:35pm
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The humble money order may seem quaint in a world full of digital payment options. With the ability to send and receive money via an app or pay with a mobile wallet or contactless credit card, when would you ever need to use a money order?
Money orders may no longer be a common form of payment, but they still serve an important need—one not easily duplicated by other forms of payment.
Here’s what you need to know about money orders, how they work and when to use them.
Much like a check, a money order is a paper payment. Unlike a check, money orders can’t bounce. You purchase a money order with cash or another guaranteed form of payment, such as a traveler’s check or debit card.
When purchasing a money order, you must provide the payee’s name (the recipient), and the issuing financial institution’s name must be on the order. Having both pieces of information printed on a money order makes it difficult for anyone other than the payee to cash it. This makes money orders safer than cash.
Just make sure to keep your receipt, so you can track and recover funds if your money order is lost or stolen.
Money orders have certain limits. For example, at the United States Postal Service (USPS), you can’t purchase a money order for more than $1,000. If you buy more than $3,000 worth of money orders in a single day, you’ll be required to complete a special form and produce a government-issued photo ID.
Like paper checks, money orders require that you include specific information. Money orders have empty spaces, where you’ll fill out these details:
Generally, you can expect to fill in your name in a spot labeled either “purchaser” or “from,” and you will fill in the reason for payment in the “memo” line.
It’s important to fill out the money order carefully since you may be unable to correct a mistake.
When you purchase a money order, you must prepay the face value of the order along with the issuer’s fee. This means a money order can’t be returned for insufficient funds, unlike a check that can bounce. In most cases, you must pay with cash or a debit card, although some providers allow you to buy a money order with a credit card.
There are a number of institutions that sell money orders. These include:
Be prepared with a way to pay for both the face value of the money order and the fee. If you purchase a money order from your bank, you’re generally able to pay for the face value of the money order and the fee from your checking or savings account.
Each money order has a nominal fee, which can cost around a dollar at some retailers and check cashing stores. USPS charges $1.45 for money orders of up to $500 or $1.95 for orders between $500.01 and $1,000. Money orders can cost as much as $5 at a retail bank.
Cashing a money order may cost you, depending on where you take it. Check cashing stores, convenience stores and retailers often charge a fee. But you can deposit a money order fee-free into your bank account and usually cash it for free at the issuing institution. For instance, you can cash a USPS money order at a post office for no charge. Some rural mail carriers may even be able to cash USPS money orders on their routes if they have enough cash on hand.
Mail a money order just like you would a check. Place the money order in an envelope, include the recipient’s address and your return address on the front and apply postage. Alternatively, you can hand over a money order in person.
International money orders allow you to send money to a recipient outside the United States, though the purchase limits and fees differ from domestic money orders. For instance, the USPS has a purchase limit of $700 for international money orders ($500 for money orders going to El Salvador or Guyana). There’s a $12.25 issuing fee and a processing fee that varies depending on the recipient’s country. The recipient may face fees when cashing or depositing the money order in their home country.
You can generally cash a money order at your bank, the issuer, some retailers, cash-checking stores and other institutions, but you may have to pay a fee.
You’ll typically pay the lowest fees to cash a money order at the issuing institution. You can often deposit a money order into your bank account without a charge.
When you deposit or cash a money order, you’ll need to endorse it on the back. Do not sign the money order before you’re ready to cash or deposit it— you may have to sign it in front of the teller or associate, and you’ll need to provide a government-issued photo ID.
In general, you can’t purchase a money order online since it’s difficult for a money order issuer to verify a purchaser’s identity and payment method over the internet. But many institutions that provide money orders offer online transfer options as an alternative.
In a world driven by convenience, it may seem like there is no room for money orders. However, there are several excellent reasons to choose a money order over other forms of payment:
Money orders offer protection to both the purchaser and the recipient. The recipient knows the money order can’t bounce; the purchaser can track their money order to make sure it arrives safely. Additionally, purchasers may be able to cancel money orders that they suspect may be lost or stolen.
That said, money orders can sometimes be used fraudulently. It’s wise for purchasers to hold onto their money order receipts until the recipient has deposited or cashed the payment. And it’s best for recipients to deposit or cash their money orders promptly after receiving them. These steps can help protect you from money order scams.
You receive a receipt from the issuer when you purchase a money order. This receipt includes the serial number or money order number, the dollar amount and possibly the issuing location. You can use this information to track your money order online through the issuer’s website. The tracking information will tell you if the money order has been cashed or not.
Although money orders serve a useful purpose, they have several drawbacks.
Some payees accept a money order or cashier’s check. This is because both of these forms of payment are guaranteed, though they differ in how they are guaranteed.
You purchase a money order from an issuer with a guaranteed form of payment—the money order can’t bounce.
With a cashier’s check, the bank first determines that the purchaser has enough money in their account to cover the payment. It then transfers the money from the payer’s account to the bank’s account and issues the cashier’s check with the payee’s name and the payment amount filled in. Generally, you have to be a banking customer at the issuing bank to access this option.
Money orders may not be a go-to payment method, but if you need a guaranteed form of payment, money orders are a widely available and low-cost option. Although money orders have some drawbacks, their usefulness as a secure payment method means they can be a savvy choice for transactions.
Some institutions allow purchasers to use a credit card. If you find an issuer that accepts credit cards for money order purchases, keep in mind that your credit card company may treat the money order purchase as a cash advance. That’s because money orders are guaranteed and must be backed with cash. This could mean you incur a cash advance fee, and you may have a higher interest rate on the money order purchase than on regular purchases.
A money order is a paper payment method embossed or watermarked with the name and logo of the issuing institution. The front of the money includes a serial number and empty fields for filling in the required information. The back of a money order is mostly blank, with space at one end for the recipient’s signature.
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ContributorEmily Guy Birken is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial topics relatable and easily understood by the layperson. She is the author of four books, including End Financial Stress Now and The Five Years Before You Retire.
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