What is a Money Order?

Jun 30, 2023 12:13:52 PM

A money order is a payment method in which an individual or company sends money through an issuer by paying a small fee. Closely resembling checks, money orders allow for simple and safe transactions, offering an alternative to cash or cash apps while being widely accessible, as they can be purchased in banks, credit unions, post offices, and even grocery stores. This payment method has simplified non-digital transactions, but money orders come with a few limitations—so it’s important to learn their ins and outs before choosing to purchase one. 

How to Purchase a Money Order

Using money orders is simple and can be safer than writing checks, although they are not exempt from risks. Deciding where to purchase the money order one is a factor to consider, as not all issuers charge the same fee or have the same limit for transactions. The US Postal Service, for example, does not allow for transactions over a thousand dollars. In terms of pricing, it charges $1.75 for all money orders under $500 and $2.40 for money orders up to $1,000. One benefit of buying from the Postal Service is that you will receive a tracking number, enabling buyers to check the status of their order at any time. This is not true for all issuers, and in many cases, payment tracking may come with an extra charge.

Purchasing a money order requires minimal personal information to be provided by the buyer, and many people who purchase a money order appreciate the opportunity for data privacy. The details required by the issuer may vary, but in general, the money order receiver’s name and address will suffice for payment to be issued. The fact that no routing or checking account number is required is one of the benefits of this transaction: senders avoid providing sensitive information through the mail or online. This is particularly useful for people who don’t have a savings or checking account, or who simply find regular bank transactions too complicated. 

How to Cash a Money Order

Cashing a money order is as simple as sending one; although some fees might apply depending on where you choose to cash it. Most commonly, people receiving a money order will visit their bank to pick up the funds; and the deposit fee is usually waived. If cashing your money order at a bank isn’t possible, money orders can also be picked up at many other locations, including a post office, Western Union, or drug stores such as CVS or Walgreens. In general, almost all institutions that issue a money order can also cash it. Do be aware that when cashing a money order, it may be necessary to sign or endorse the order, but it is important not to do so beforehand, as cashiers will verify the receiver’s identity before requesting their signature. 

Further Considerations

Money orders are often practical when small amounts of money are involved, due to their simplicity, but for larger amounts, they might not be the best option. Although it is possible to send more than one at once, for orders over $3,000, an additional form might be requested to avoid fraudulent transactions. A final consideration is time, as it may take a few days until the order arrives, and when it does, many times banks do not make the full amount of money available the day it is cashed. This will vary depending on each receiver’s bank, but if speed of delivery is a must, then this option might not be the most suitable. 

While money orders are typically a safe and secure way to send and receive money, it’s good to be aware that some consumers have been hit with money order scams. If you are contacted by an unknown person claiming that they have accidentally sent you a money order, or asking you to pick up a money order on their behalf, don’t respond and don’t follow through with their request. Instead, call the US Postal Inspection Service to report the suspected fraud. As always, never share any personal or financial details over the phone or via email.