What Is a Money Order?

A money order is a secure alternative to cash or a personal check, which you can use to send money or pay bills. It works much like a check, and is usually issued by a government or banking institution. You can cash or deposit a money order into a bank account.

Money orders are readily accepted and converted to cash and are often used by people without access to a standard checking account. They are an acceptable form of payment for debts, both personal and business. You can buy a money order for a small service fee from most banking institutions and many other locations. Money orders were first issued by American Express in 1882 and later became popularized as traveler's checks.

How Money Orders Work

If you buy a money order, you will have to fill out the name of the recipient on a form and the amount that the recipient should receive. Domestic money orders have a maximum limit of $1,000, so you'd need to purchase multiple orders if you need more than that amount. Be sure to fill out the money order carefully; it's a one-off purchase and you need to keep good records of it.

Your money order will show the name of the person or entity being paid, the issuer’s name, and the amount of money that can be cashed. This dollar value doesn't include the fees charged. Be aware that different locations may charge different fees for money orders. A bank or credit union will usually charge more than a convenience store to issue money orders.

When you pay for a money order, it comes with a receipt that includes the serial number of the money order. You should keep this information until you're certain the money order has cleared. Without a receipt, tracing a money order can be difficult or even impossible.

Advantages and Disadvantages of a Money Order

Advantages Explained

• Doesn't include sensitive information: In some situations, paying with a money order can be safer than paying with a personal check. That's because personal checks include the account holder's routing number and bank account number printed on the bottom—this information can be stolen and used to create and sign fraudulent checks. In contrast, money orders don't include personal information about the purchaser.
• Recipient can cash it at their local bank or credit union: When you receive a money order, you don't necessarily have to go to the same place that sold the money order or the sender's bank. You can usually cash it at your local bank or credit union, and may be able to cash it at certain retailers, like grocery stores and drug stores.
• Can be deposited into a bank account for free: You can deposit a money order into a bank account, much as you would do a check. Depositing money orders is a good option for recipients concerned about the fees charged to cash the certificates at other locations.
• Can be issued in one country and cashed in another: Money orders can and often are used to send money outside the country. An issuer with multiple branches in different countries can issue a money order in one country that can be cashed in another country. International money orders thus provide an inexpensive and swift way to send money across the border.

Disadvantages Explained

• Can be harder to track than a personal check: To track a money order, you must fill out tracking forms and pay an additional fee to learn whether the money order has been cashed. The entire process for researching the status of a money order can take weeks. However, the U.S. Postal Service (USPS) offers an that allows you to input a money order number and get an update on its status.
• Buying and cashing the money order can incur a fee: When you buy a money order you may need to pay a small fee, and the same goes for cashing a money order somewhere other than your own bank or credit union. Some potential options for bypassing fees for cashing money orders are the post office, your own bank account, or the issuer's office.
• Funds could be delayed, depending on where it's cashed: Note that if you cash a money order at your local financial institution and it's not a branch of the issuer, you might not be able to get all of the money right away. It depends on your bank's funds availability policy.
• Can be fraudulent: Some unscrupulous people create fake money orders. Be wary about receiving one from someone you don't know, and don't spend the cash from money orders you deposit in the bank until the deposit transaction clears.
  

How to Buy a Money Order

You can buy a money order at any bank or credit union, as well as some drug stores, most grocery stores, convenience stores, and any store that offers check cashing or money services such as MoneyGram or Western Union. The U.S. Postal Service also offers money orders.

To order one, you simply need to bring enough money to pay for the money order (including fees), either in cash or with a debit card.

How Much Do Money Orders Cost?

Although there is a fee for buying a money order, it's generally only a small fraction of the value of the order. For example, the U.S. Postal Service charges $2.10 for money orders of up to $500, and $3.00 for orders from $500.01 up to $1,000. Fees are lower for money orders issued in military postal facilities.

Money orders from commercial institutions may have different prices, but the fees will tend to be similar. However, international money orders may incur higher fees.

Money Orders vs. Cashier's Checks

A cashier's check is similar to a money order, in that both are sometimes used for payment in situations where cash or a personal check would be impractical. Neither can be bought with credit—you have to use cash.

But unlike a money order, a cashier's check is simply a check written by a financial institution against its own assets. This is considered more reliable than a personal check because there is no chance of the check bouncing.

For this reason, cashier's checks are frequently used to make large purchases, such as for a house or vehicle. Whereas banks might place a hold on a personal check for that much money, funds issued by a cashier's check should be available the next business day.

In contrast, money orders are typically used for smaller transfers, such as for rent or mortgage payments. Many institutions, such as the U.S. Postal Service, cap money orders at $1,000.

Alternatives to Money Orders

In addition to checks and money orders, other ways to send guaranteed funds to an individual or business include traveler’s checks, wire transfers, bank drafts, and cashier's checks. But money orders are frequently used for payment in situations where the party being paid isn't set up to receive cash.

In some cases, a personal check, debit card, credit card, or even online payment apps might also be acceptable for payment. However, money orders are slightly different from these alternatives. Unlike card or electronic payments, the recipient of a money order doesn't need any special technology to accept a money order. And, unlike checks, a money order can't bounce.

The Bottom Line

A money order allows the recipient to receive immediate cash payment from a bank or other financial institution. For that reason, money orders are a popular way to make small to medium-size payments in circumstances where cash or personal checks aren't practical. Unlike cash, lost money orders can be replaced (with a receipt presented), and they can't bounce due to insufficient funds.