What is a money order and how does it work?

Money orders may seem outdated in a world of apps, online banking and instant cash transfers. But there are still times when a money order might be necessary. 

So what is a money order? It looks and functions like a traditional check in some ways. But there are key differences.

Key takeaways 

• Money orders are sometimes used as alternatives to checks and cash.
• Because money orders are prepaid, they’re guaranteed.
• Money orders may be available at locations like banks, convenience stores and post offices.
• The fee to purchase a money order might range from $1 to $5.

When you buy a money order, you fill it out with the recipient’s name and the amount to be paid. You then prepay the full amount for the value of the money order, plus a small fee. The recipient can cash or deposit the money order just like they would a check. In some cases, there might be a fee for cashing the money order.

Money order limits to keep in mind

Depending on where you purchase your money order, you may be limited to an order of $500 or $1,000. 

For example, the Postal Service sets a $1,000 limit on domestic money orders and a $700 limit on international money orders. Purchasing multiple money orders to cover larger amounts might be a way to get around the issue. So could a cashier’s check, which doesn’t typically have a limit. 

With so many payment options available today—from checks to online apps and cash—you may be wondering when it’s worth considering a money order. They can work as an alternative to cash and checks because money orders don’t require either party to have a bank account. So here are some circumstances when a money order may be helpful:

If you don’t have a bank account

Because you pay for a money order with cash, it can be a good alternative payment method if you don’t have access to paper checks. But remember, there are typically fees. 

If you’re sending payments through the mail

Unlike a check, a money order doesn’t contain sensitive information like account numbers or routing numbers. And unlike cash, a money order can only be used by the recipient. So you might feel more comfortable with a money order if you need to send money by mail. Plus, if you keep the money order receipt, you can use it to track your payment.

If you don’t want to wait

Paying with a money order can save you the trouble of waiting for a check to clear and post to your bank account.

You may be able to buy money orders at:

• Post offices
• Banks
• Convenience stores
• Credit unions
• Money transfer services
• Drugstores
• Grocery stores
• Big-box stores

How much is a money order?

Money order prices differ depending on where you buy them. Fees for money orders are usually based on the money order’s dollar amount and are typically between $1 and $5.

How to pay for a money order

You can typically pay for money orders using cash or a debit card. Because issuers often want the cash upfront, they may not accept a personal check or credit card. 

Even if a credit card is accepted, your card issuer could consider it a type of cash advance. And if it does, you generally will pay a fee for it and may be charged interest from the transaction date. Plus, if the added balance of a cash advance sits unpaid for a while, it could also hurt your credit scores. Check your credit card agreement to see what types of transactions might be considered a cash advance.

Money orders may look different depending on where they’re purchased. But generally, filling one out is similar to filling out a check. 

Each one comes dated and with the amount printed on it. Then, you fill out the payee’s name, your name, your address and your signature. You can also write notes to yourself in the memo section about what the payment is for or anything else.

Money orders usually come with receipts that include the serial number, so you can track and confirm the payment’s delivery.

If you convert the money order to cash, you may be able to avoid fees by taking it to the provider that issued it. For example, the Postal Service says you can cash its money orders for free by visiting a post office. If you go to a check-cashing store to cash a money order, there may be a fee. 

Depending on the bank, you might also be able to deposit your money order. But you may have to visit a physical location to do it.

Money orders generally don’t have expiration dates. But sometimes, there might be a charge to cash them if you wait too long. The back of your money order may have more information. 

What to do if you lose a money order

If you lose your money order, the funds aren’t necessarily gone. Your next steps may vary.

Contact the issuer as soon as possible. Some issuers may be able to stop the payment. Others might investigate and replace the money order if it’s confirmed lost or stolen. A replacement may come with a processing fee. 

If you think the money order was stolen, you may also consider filing a police report. 

Like any form of payment, money orders can be subject to scams. 

The Postal Service—among other issuers—designs money orders to prevent fraud, so they are marked with distinct designs that can be seen when held up to the light.

You can also consider the amount of the money order. Typically, the Postal Service’s limit is $1,000, so if it’s in an amount larger than that, it may be fraudulent. Check for a discolored dollar amount too. That could be a sign that it’s been erased, which can indicate fraud.

If you think you’ve received a fake money order through the post office, you can verify your money order by calling 866-459-7822. You can also report potential scams to the U.S. Postal Inspection Service.

Money orders can be useful, but they may not be right for every situation.

Cashier’s check

Cashier’s checks are another way to make payments with guaranteed funds. With a cashier’s check, money is taken directly from your checking account, which usually means you need an account with the issuer and enough money to complete the transaction.

Typically, a cashier’s check is a popular alternative for larger payments where personal checks and cash may not be an option. They are issued and signed by a financial institution representative. So not only are cashier’s checks guaranteed, they’re also widely accepted and safe.

Wire transfer

A wire transfer is an electronic transfer of funds from one bank, credit union or financial services company directly to another. It allows people in different locations to exchange money without cash or a check. You have to pay for the transfer upfront and provide information to the institution, like the recipient’s name and bank details.

Generally, domestic wire transfers take one to three business days, while international wire transfers can take two to five business days. They may come with a fee, depending on the bank. 

ACH transfer

Like a wire transfer, an ACH transfer is a type of electronic payment. It’s used for things like direct deposits, online bill pay and more.

ACH transfers are processed through the National Automated Clearing House Association and are regulated by the federal government. 

Money orders may not be the most popular option to pay or receive money, but they are widely accepted. Because they’re guaranteed, money orders can be a good idea when sending money through the mail. 

If you’re interested in learning more about money orders, other secure payment options and other ways to protect your accounts, you can check out more privacy and security articles from Capital One.