Takeaways
- Money orders are prepaid paper payment forms that function a lot like checks.
- Money orders send small and mid-sized payments, capped at $1,000 per order.
- Money orders can transfer money if you don’t have a checking or savings account.
- Money orders are secure forms of payment that don’t include your bank account information.
- Money orders can be cashed at banks, the U.S. Postal Service, grocery stores, and convenience stores.
What Is a Money Order?
A money order is a common form of payment that functions similarly to a check but is a prepaid instrument. You buy a money order for a specific amount, which the issuer then guarantees. The issuer is frequently a bank, post office, financial institution, or retail location.
Money orders are made out to a specific payee, the only one permitted to cash or deposit them. Since the money order is prepaid, the payee has the assurance that it will not be returned or “bounced,” which can happen with personal checks if the account it is drawn from does not have available funds.
Money orders are commonly used for transactions where cash or a check is too risky. They are also ideal if you cannot access conventional checking or savings accounts or want to pay for something securely through the mail. Although money orders come with a slight fee to purchase, they are relatively cheap.
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How Money Orders Work
Creating or using a money order is a relatively straightforward process. First, you must find a location that sells money orders, like a bank, credit union, or other issuers like the United States Postal Service. You can even get them from retail locations like supermarkets.
Once you find a location that issues money orders, you tell the issuer how much you need to pay via the money order. The total amount you pay for the money order will be the amount on the face of the money order plus their service charge, which ranges from a couple of cents to a few dollars.
From there, you designate the receiving party and that you are the sender. The issuer prints this information on the money order certificate. Next, you will fill in the name of the recipient (on the “Pay to” line, or the person receiving the money order so that only they can claim the value. Some money orders also include a field for the sender’s address and even a memo line like a check, where you can note why you are sending the payment and what it is for.
Finally, you send the completed money order to the payee, who can cash it at their bank or anywhere else that processes money orders. You should keep the receipt so you can get a replacement if the money order is stolen or lost.
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Pros of Money Orders
In many circumstances, money orders are the preferred payment method over cash and checks. Here are a couple of ways a money order can help you out:
- Widely Accepted: Money orders are widely accepted, making them a great payment option for transactions where carrying cash or writing a personal check could expose you to risks (e.g., bank account fraud). There are also situations where paying with cash or checks may not be accepted. You can even use a money order to pay the U.S. Treasury Department for your annual tax bill. [1] (Read more about the 7 Steps to file your taxes.)
- Secure Payments: Money orders are very safe for sending money. Since the issuer guarantees the money you send after being prepaid, it is almost impossible to send money fraudulently. Additionally, a money order's prepaid element gives the recipient peace of mind that the payment will only bounce, like a check issued with sufficient backup funds.
- Record of Payment: Money orders are traceable, and a receipt is issued to create a payment record. As the sender, you want to keep your money order receipt as proof of payment and check on the status of your money order. For example, if you sent a money order to the U.S. Postal Service, you could check whether it has been cashed on their website.
- Low Cost: If you don’t have a checking or savings account, money orders offer a relatively inexpensive route to send a secure form of payment. The fees for a money order scale with the size of the money order and are frequently in the range of just a few cents to a couple of dollars.
U.S. Postal Service Money Order Fee Table
| Dollar Amount | Fees |
|---|---|
| $0-$500 | $2.35 |
| +$500-$1,000 | $3.40 |
| Postal Military Money Orders | $0.79 |
(Based on the U.S. Postal Service Website, last updated August 2024)
Cons of Money Orders
Money orders are just one game in town. While they offer substantial advantages (discussed above), money orders also come with their downsides. Here are a couple of cons to consider:
- Money Order Limit: The amount you can send with a single money order is often limited. This limit is often set by the location issuing them and is typically between $500 and $1000. If you need to send more money than that, you can have the issuer create multiple money orders, or an alternative to a money order might be a better solution.
- Fees: The fees imposed by the issuer are usually low, but they can add up. You must pay a fee to get a money order issued. If your money order hasn’t been cashed for several years, additional fees could be charged, and the total fee per order could be 3-6% of the total order. This cost of sending money is much higher than other low-cost options like money transfer apps like PayPal.
- Must Prefund Payment: Money orders require you to refund your payment. When you show up to purchase a money order at an issuer, you must have cash, pay with a debit card, or bring a traveler’s check. Prepaying means you need the available funds in advance to send someone money. However, if you don't have the cash to prepay, you might need to purchase with your credit card, which is a buy now and pay later approach. (Read more about how to apply for a credit card.)
- Time-Consuming: While money orders offer a relatively secure payment mechanism, they can be more time-consuming than other payment methods. To get a money order, you must go to an issuer’s branch or location and fill out the money order application in person.
This can take time out of your day, and if your money order is accidentally lost or stolen, it can be time-consuming and challenging to deal with. If this happens, you will need your original receipt, pay a replacement fee, and get a new money order issued. This is much more time-consuming than mailing a check, sending money online with PayPal or Venmo, or paying with cash.
When to Use a Money Order
You might use a money order if you need to make a payment but need to retain proof of payment. Here are several times when you might need to send a money order:
- Need to send a secure payment
- Sending a landlord a security deposit
- Paying your tax liability
- Sending a payment via the mail
- Paying for your U.S. passport
If you still need to open a checking or savings account, a money order can be a valid payment tool until those accounts are up and running.
7 Alternatives to a Money Order
Money orders are one of many secure ways to transfer money. Here are several ideas for how to get cash quickly to make a payment:
- Cash: Although some people don't like making payments in cash because of a lack of receipt, paying with cash can be easy as withdrawing funds from your checking or high-yield savings account. You might even need to tap your emergency or slush fund.
- Checks: Check out the best high-yield checking accounts, which can give you access to checkbooks and online money transfer tools.
- Wires: If you need to pay someone quickly, you can send a wire payment from your bank account. This functions like an online check, sending payments rapidly. You can use a wire for international payments or to pay someone faster than a USP-delivered money order will get there.
- Transfer Apps: Online payment apps like PayPal and Venmo make sending secure payments to friends, family, and other parties extremely easy. These accounts are usually linked to your checking account.
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Smart Summary
A money order is a prepaid payment method for securely transferring small and medium-sized payments to another person if you don’t have a traditional checking or savings account, need to pay something via the U.S. postal service, or have a vendor that requires payment via money order (like getting your Passport [2]). By keeping your receipt from the issuing bank, money orders can be easily replaced and are safer than carrying around cash.
Frequently Asked Questions
The maximum amount you can send with a money order varies by issuer. However, the U.S. Postal Service caps the amount per order at $1,000.
Yes! Keep your receipt as proof of payment with the issuer and secure essential information like the serial number, amount, and office location. Knowing this information will let you check on the status of a money order.
(1) Internal Revenue Service. Pay by Check or Money Order. Last Accessed January 14, 2025.
(2) U.S. Department of State. Passport Fees. Last Accessed January 14, 2025.
(3) U.S. Postal Service. Sending Money Orders. Last Accessed January 14, 2025.
(4) Western Union. Do Money Orders Have an Expiration Date? Last Accessed January 14, 2025.
