What Is a Money Order? How It Works

A money order is a secure alternative to cash or personal checks, offering a guaranteed form of payment that can be easily obtained and widely accepted. Whether you’re paying rent, sending money to family abroad, or making a purchase from a cautious seller, understanding what money orders are and how they work can provide you with a valuable financial tool in specific situations.

A money order ultimately gives payees added peace of mind in knowing that the funds are actually there. But how does a money order work? Let’s find out! 

How does a money order work?

Money orders are similar to checks. You can purchase a money order for a specific amount using cash or other immediate forms of payment, like a debit card. The payee, or the person receiving the money order, then knows that the required amount of money has been cleared. They can either cash the money order or deposit it into their bank account, just like a check. 

What is the purpose of a money order?

So, why would you use a money order instead of a check? Well, it is a great form of payment if you need to send money securely because it can only be purchased with certified funds, meaning the funds have to actually be in your account. 

It’s safer than sending cash as well because you can report a money order as being lost or stolen. Money orders are also a great option for you if you don’t have a debit card. 

How to send and receive money orders

Sending and receiving money orders* is a straightforward process that provides security and reliability in financial transactions. Below are the steps involved in both sending and receiving money orders.

1. Sending a money order

Find a provider: Begin by identifying a reputable provider of money order services. Common options include banks, post offices, and retail stores. Ensure they offer this service.

Bring funds: Visit the chosen provider with the exact amount of money you want to send, as well as some extra for the money order fee. You’ll need to pay for the money order upfront.

Complete the money order: Fill out the money order form provided by the issuer. You’ll need to include your name and contact information, the recipient’s name and contact information, and the amount you’re sending. Double-check the accuracy of this information.

Pay the fee: Pay the fee associated with purchasing the money order. The fee amount may vary depending on the provider and the amount being sent.

Obtain a receipt: Once the money order is issued, be sure to keep the receipt or a copy of the money order as proof of payment. This will be important in case the money order is lost or needs to be canceled.

Send the money order: You can send the money order by mail or deliver it in person to the recipient. If you’re mailing it, consider using a secure and traceable method.

2. Receiving a money order

Receive the money order: If you’re the intended recipient, you will receive the money order either by mail or in person.

Endorse the money order: Turn the money order over and sign the back. This endorsement is necessary for cashing or depositing the money order.

Visit a provider: Take the endorsed money order to a location that offers money order cashing services. This could be a bank, a check-cashing service, or a retail store. Ensure they accept money orders and inquire about their fees.

Cash or deposit: Depending on your preference and the provider’s policies, you can either cash the money order immediately or deposit it into your bank account. You may need to provide identification when cashing the money order.

Keep records: Retain a copy of the receipt you receive when cashing the money order. This will serve as proof of the transaction and may be needed for your records.

How much does it cost to cash a money order?

Money orders can be cashed for a small fee, and that fee will vary depending on where it is cashed. Some providers, like the United States Postal Service* (USPS), allow you to cash their money orders at Post Offices for free. 

Can you deposit a money order via mobile banking?

Most banks allow you to deposit a money order via mobile banking. For example, the Ingo app¹ allows you to deposit a money order directly into your RoarMoney account². 

When using Ingo, your funds can be available within minutes or up to 10 days later, depending on the destination of the funds. This means you can have access to your money quickly as well as being confident that the funds will clear in near real-time.   

Your financial institution might have similar rules when it comes to depositing money orders or the availability of funds. Most banks require a 24-hour waiting period* before funds are cleared through mobile banking, though it always depends on the amount. 

Be sure to check with your bank before depositing the money order if you need the funds quickly! 

Can a money order be cashed immediately?

Yes, you can cash a money order immediately. Most places treat a money order like a check or cash, meaning you can receive your funds quickly with a small fee included. The fee is taken directly from the total amount of the money order. 

Is a money order safer than a check?

Money orders are as safe as checks. They allow you to send funds in the mail if you do not want to send cash. You can track a money order if you want to ensure that the payee receives it. This also makes it possible to potentially ask for a refund if the money order gets lost in transit.  

Keep in mind that there could be a fee associated with a refund on the receiving end of a money order. Plus, there are scams surrounding money orders, so it’s important to verify if a money order is legitimate before you accept one. There will be a number on the money order, allowing you to verify its legitimacy. 

What happens if you fill out a money order incorrectly?

If you fill out a money order incorrectly*, you will need to replace it. You can request a replacement from the same place you originally purchased the money order. 

It is important that you do not try to change a money order because that can make it invalid. One of the best practices to implement is to complete the money order before you leave the bank or store just in case. 

Things to consider with money orders 

Money orders are a great alternative to checks, but there are some things to consider before you choose to pay via money order.

1. Cannot be purchased with a credit card 

Remember that one of the great things about money orders is that you can trust that the funds are in the bank account of the person signing the money order. This means that it can only be purchased with cash or via a debit card. 

Only have a credit card? Consider a cash advance if you’re in a pinch and only have credit cards. You can then use the funds from the cash advance to purchase the money order. 

2. Money order limitations 

Need a $5,000 money order? You might not be able to get it all at once. Money orders have a limit of $1,000 in most places, while some locations may have an even lower limit. You might be able to purchase multiple money orders to get the amount you need, but it is important to consider these limitations as there is still a fee per money order. 

3. No expiration dates 

Been hanging on to a money order for a few months? Not to worry. Money orders, as long as they are domestic, do not have an expiration date. Though you can hang on to them as long as you need, keep in mind that it’s best to cash it as soon as possible. 

4. Attractive to scammers 

Be aware of money order scams*! The USPS offers excellent advice when it comes to how you can spot a fraudulent money order*. Pay attention to the paper that the money order is printed on before accepting it as a form of payment. 

If someone gives you a money order for more than the requested amount and asks for the difference back, ask for a new money order with the correct amount. Despite the scams, money orders are still safe and effective methods of sending and receiving payments. 

The advantages of money orders

Money orders have many advantages, the biggest one being the way they work like cash but with added security. You can track a money order if you send it via mail to confirm that it has not been lost. 

Also, since they work like cash, the chances of a money order bouncing like a check are greatly reduced. A money order is also an ideal form of payment for someone who does not have checks or access to a debit card. 

If you do have checks, you might benefit from using a money order if you prefer to not give out your account number or physical address. A check will include your personal information, but a money order does not tell the payee anything about you. 

This can provide you with peace of mind, though it will cost you a small fee. Lastly, there are numerous places that sell money orders. A quick Google search will put you in contact with a local store, bank, or post office that sells money orders near you. 

The disadvantages of money orders

Though money orders are useful financial tools, they do come with some disadvantages, one of them being the inevitable fee. Though minimal, there is a fee associated with purchasing a money order. 

There is also a fee associated with cashing a money order if you don’t have a checking account. Another disadvantage is that you need to either have cash or a debit card to purchase a money order. 

This can be fixed with features like Instacash, which gives you access to a portion of your funds early. Even so, there can still be a bit of a roadblock. 

For instance, the $1,000 limit for a money order can be a disadvantage. If you need to get a money order for $2,000 as soon as possible, then you may need to look into an alternative option, like a cashier’s check. 

Money order vs. cashier’s check

There are money orders and then there are cashier’s checks. You may be wondering, “What’s the difference?” Well, cashier’s checks allow you to take out a higher amount, unlike money orders that have a limit of $1,000. This makes cashier’s checks far more ideal when it comes to larger purchases. 

A cashier’s check can only be purchased at a financial institution, and the fee is typically $10, which is a bit more expensive than the fee associated with a money order. Also, with a cashier’s check, you need to know exactly who you will be paying so that the person’s name can be printed directly on the check by the bank.

However, this isn’t the case with a money order. If you have to choose between a money order or a cashier’s check, consider your needs and the accessibility of each. Who needs the money? How much money do you owe? Do you have access to a bank account? If you owe less than $1,000 in total, then your best bet is a money order.

Reliable Money Transfer Options

There are lots of ways to get access to cash, like via a debit card that has an optional  rewards program. A money order is another option.

Money orders provide a safe and efficient way to send and receive money to others. If it’s a payment in exchange for services or you just want to help a family member who is in a bind, a money order can come in handy. 

Let’s face it. It’s easy to go overboard with your spending, and it’s not uncommon to need access to a portion of your future pay early.  MoneyLion gets it. With Instacash, link your checking account to see if you qualify for a cash advance! 

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