What Is a Money Order and How Does It Work?

What Is a Money Order?

A money order is a piece of paper that provides a safe payment to a person, organization or business. Since money orders aren't attached to a checking account, you must purchase them with money upfront at your bank or through a service like Western Union, MoneyGram or the U.S. Postal Service. Keep in mind, most banks and outlets that offer money orders require you to pay a small fee for the service, usually between $1 and $5.

Since the funds for money orders are paid when they are purchased, they can't bounce like a check—so the funds are guaranteed. Both the sender and recipient must sign their name on the money order, which makes it harder for thieves to cash.

These days, you may prefer sending money securely through a mobile payment app like Venmo or PayPal. Still, money orders remain a secure way to send and receive money, especially if you don't have access to a bank account.

When Should I Use a Money Order?

With the popularity of digital payment apps, money orders may seem like an old-school method of payment whose time has passed. However, money orders can still benefit you in a variety of scenarios—they include:

• You need to pay for something with a check but don't have a checking account
• You'd rather not disclose banking information to the recipient or are leery about sending sensitive information through the mail
• You want to safely send guaranteed funds internationally
• Your landlord or a vendor requires payment via money orders
• You want to track payment and verify it lands in the right hands
• You want the option to cancel the payment, just as you would with a check

However, money orders are not foolproof and can be subject to scams. Many of these scams involve the sender giving you a fake money order. One way to verify a money order is to make sure it has standard security features such as stamps or watermarks that are revealed under light. If you suspect a money order might be counterfeit, verify the funds with Western Union, USPS or another provider before cashing.

Where Can I Get a Money Order?

Money orders are available in a surprisingly wide variety of places, including the following:

• Banks and credit unions: Most banks and credit unions offer money orders for purchase. Typically, they're not available for online purchase, so you must obtain one from a teller at a branch location.
• Convenience stores and retailers: You can purchase money orders at many supermarkets, gas stations and major retailers through a money transfer service like Western Union or MoneyGram.
• Online banks: Many online banks, including Ally, don't offer money orders, but some do. TD Bank, for instance, offers money orders up to $1,000 for their customers.
• Check-cashing stores and payday lenders: Like retailers and other merchants, these establishments often sell money orders through Western Union or MoneyGram.
• U.S. Postal Service: You can purchase money orders at any post office location for $3 or less, with the cost depending on the amount of the money order. The USPS also offers money orders at military facilities for $0.70.

A few things to consider: If you're sending money to another country, make sure the money order provider you're using will be accepted in that country. Also, most providers limit the size of money orders you can purchase. For example, the largest money order you can buy through the USPS is $1,000. If you're trying to pay a $2,500 bill, for instance, you'll need two $1,000 money orders and one for $500.

How Much Does a Money Order Cost?

Fees for money orders vary based on where you purchase them. Here's a breakdown of prices from popular outlets that offer money orders.

Plan to use cash or a debit card to cover the full value of your money order plus fees. Banks and retailers generally don't allow you to purchase a money order with your credit card.

How to Fill Out a Money Order

To fill out a money order, the only information you need is the name and address of both the purchaser and the recipient. Remember, it's important to be accurate because you can't alter a money order once it's completed. Follow these steps to fill out a money order:

1. Enter the recipient's name and address. Make sure the name of the person or business you're paying is spelled correctly. The recipient will be required to show ID when they cash the money order, so a mismatched name won't work.
2. Add your name and address. List your address in the purchaser's section of the slip. Double-check the accuracy of the address just in case the money order is returned to you.
3. Sign the front side of the money order. Both the sender and recipient must sign the money order for it to be valid. The purchaser's signature goes on the front of the slip, while the recipient must sign the back side to cash a money order.
4. Add a note. There's usually space on the money order to write a memo. Doing so is optional, but you may wish to include a note for your records noting a corresponding account or order number or the reason for the payment.
5. Hold on to the money order receipt. Once you've filled out the money order, detach the receipt and keep it for your records. The receipt doubles as proof of purchase and a tracking record since you can use the tracking number to confirm when the recipient cashes the money order.

How Does a Money Order Compare to Alternatives?

While money orders generally offer a safe alternative to sending cash or checks, they do come with fees and require you to buy one at a physical location. Consider other alternatives that might serve your needs better. Review this comparison table to gain a better understanding of your options:

Frequently Asked Questions

The Bottom Line

If you need to purchase or cash a money order, check out your local options, including your financial institution, supermarket, local retailer or even the post office. Money orders aren't necessarily the fastest or most secure payment choice in the digital age, but they're still an affordable option that doesn't require a bank account, especially if you don't have a checking account.

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