A Guide to Money Orders

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First issued by American Express in 1882, money orders are a convenient and widely accepted form of payment that are secured by a third party. You can purchase them almost anywhere in the United States, usually for a small fee. Below, we have outlined how money orders work, how much they cost and everything else you need to know.

What is a money order?

A money order is a certificate of payment that is secured by a financial institution or another third party. Much like a personal check, with a money order you assign a recipient, which reduces the risk of it being cashed by someone other than the intended payee. You’ll need to include your name and contact information, as well as the recipient’s, on the money order.

It is also a convenient way to pay bills if you don’t have a checking account. Because you need to pay for money orders in cash, the receiver never needs to worry about the money order bouncing or being returned for insufficient funds, as is possible with a personal check.

Example of a money order

4 Steps to filling out the money order:

  1. Write the name of the person you are paying.
  2. Fill out your information where it says something like Purchaser, Sender or From.
  3. Sign the money order
  4. Save your receipt! It’s very important to show a record of having paid for the money order if you lose or the recipient loses the physical money order. You can also find tracking information on the receipt to help recover it later.

When should you use a money order?

  • When you want to send a secure payment that is backed by a third party.
  • If you don’t have a checking account but need to make a payment and do not want to risk paying with cash.
  • When you don’t want to provide your bank account information.
  • If the person you are paying doesn’t have access to a bank account such that a personal check would be harder to cash.
  • If the recipient of the money order wants to ensure that the payment does not bounce or is returned for insufficient funds.
  • When you need to send money overseas and don’t want to send cash or a personal check. (International money orders are available and accepted by many countries.)

Where to get a money order

Money orders are prepaid, and you can buy them just about anywhere, including from the third-party vendors listed below:

  • Financial institutions, like banks and credit unions, offer money orders.
  • The United States Postal Service (USPS) offers money orders at all of its locations. You may send a money order domestically for a maximum of $1,000, and internationally for a maximum of $700.
  • Money transfer agents, such as Western Union and MoneyGram or other check-cashing outlets, carry money orders. Some of these providers have set limits on the amount that you can purchase.
  • Convenience stores and supermarkets, like Walmart, often provide money order vendors at their stores. For instance, Walmart offers money orders through MoneyGram.

How much do money orders cost?

You can get a money order by prepaying the full amount plus a small service fee charged by the institution; they can be purchased with cash, debit card or traveler’s check. However, because you prepay for a money order, it is like handing over cash. So, using a credit card to buy a money order is considered a cash advance by many banking institutions and you may be charged a fee associated with that service, which can get expensive.

Listed below are service fees associated with the standard third-party vendors that offer money orders:

  • Financial institutions sometimes waive service fees associated with money orders for certain customers. For instance, if you have a Chase Premier Plus Checking account, there is no fee for your money order.
  • The USPS charges a $1.20 service fee for money orders up to $500, and $1.65 for a money order in excess of $500. The fee for U.S. postal military money orders is $0.40. You can send a money order within the United States for as much as $1,000, or overseas for a maximum of $700 ($500 for El Salvador and Guyana) for a fee of $8.55.
  • Money transfer agents often have their own fees depending on their location. For instance, Western Union does not have a set fee rate. It’s best to check with the location from where you are planning to purchase the money order.
  • Convenience stores and supermarkets who are authorized agents will sell money orders for a small fee. For instance, Walmart charges a $0.70 fee for a money order of any amount, up to a maximum of $1,000.

Important things to know about paying with a money order

  • If you lose your money order: You may cancel a money order or request a refund (so it’s always wise to keep your receipt), but doing so often includes a fee. Western Union charges a $15 non-refundable processing fee for canceling or requesting a refund if you have your receipt, and $30 if you don’t. And, simply inquiring about a money order at the USPS incurs a fee of $5.95 (domestic) or $6.45 (international). If the money order has already been cashed fraudulently, you might not get a refund, but you can alert law enforcement.
  • If you cash your money order instead of depositing it: Cashing a money order at a check-cashing outlet, instead of bringing it to your bank, often requires a fee. But if you do need to cash it at a place other than your bank, consider bringing it to the same vendor that issued the money order, which might avoid fees.
  • Money orders can be targets for con artists: Because money orders are not used as regularly as personal checks, fake ones can be tough to identify. As a result, scammers may target money orders as a way to steal money. A common scenario when selling something on Craigslist, for example, is that the scammer will pay the seller with a money order that is more than the purchase price and ask for the difference back.

Alternatives to money orders

Although money orders are a secured, convenient form of payment, sometimes there are better options. For instance, you cannot get a money order for just any amount (there are maximums), and if you don’t have a checking account, it can become pricey to cash money orders consistently at check-cashing outlets. Listed below are some alternatives to using money orders:

  • Cashier’s checks: There is usually no cap on the amount of a cashier’s check, so you may purchase them in larger sums. Because a cashier’s check is issued by a bank and drawn from the bank’s funds, the recipient usually gets the money more quickly than with a money order.
  • Certified checks: Much like a cashier’s check, a certified check is also issued by a bank. The difference is that the amount of the certified check is withdrawn from a personal or business checking account and the bank account number is included on the check.
  • Wire transfers: This alternative is best if the recipient needs the money as quickly as possible. However, wire transfers are pricey and you need to know the recipient’s bank account and routing number. If you wire money in U.S. dollars from a Bank of America account to a financial institution within the U.S., it will cost you $30, and if you send it to an international account, it will cost $45.
  • Prepaid debit cards: If you’re using money orders because you don’t have a checking account, a prepaid debit card is another alternative. You can use them anywhere as long as you prepay with a set amount of cash.

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Vivian Giang
Vivian Giang |

Vivian Giang is a writer at MagnifyMoney. You can email Vivian here

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