What Is a Money Order?

• Money orders are a type of secure payment option that guarantees available funds.
• Unlike checks, money orders can’t bounce due to insufficient funds.
• Of the several specific reasons to use a money order, international transactions or making large purchases are common.

You may consider multiple payment methods when completing a transaction. In some cases, you may want to — or be required to — turn to a secure form of payment that guarantees the availability of funds. In this scenario, you may want to use a money order.

What is a money order? This long-established option is a paper form of payment that’s secure and trusted. Money orders can be used in lieu of a check, cash or other form of payment that guarantees up-front payment; in contrast, personal checks, debit card or credit card payments can bounce due to insufficient funds.

When to use a money order

On different occasions, you might want to opt for a money order versus other forms of payment. For example, when:

• You need to send money to someone
• You’re sending money internationally
• You’re required to guarantee your funds are readily available
• You’re making a large purchase and want something more secure than cash

Alternatively, you may want to request another person pay you via a money order if you need to receive a secure form of payment. Money order payments help ensure the payee has enough money to cover a transaction since the order itself functions like cash.

Pros and cons of money orders

As with other payment options, money orders have both pros and cons to consider. 

Money orders benefit both partners in a transaction. Benefits can include:

• Security: Money orders are more secure than carrying cash.
• Reliability: You don’t have to worry about bounced checks or debit card transactions not going through.
• Simplicity: The payer can generate funds — and the payee can withdraw them — with ease. You can turn a money order into cash at the entity that issued it, or you can bring it to your bank and have the balance deposited into your account.
• Reach: Money orders can be easy to use for overseas transactions.

However, money orders come with drawbacks, as well. These can include:

• Fees: Money orders tend to come with purchasing fees that you could avoid through another payment method. You may also need to pay fees when you cash a money order.
• Less traceability: Money orders take longer to track than checks or other transaction types, sometimes requiring forms and several days (or a week) before you know if your money order has been cashed.
• Fraud risk: Money orders can be fraudulent or counterfeited, meaning you may not want to accept them from people you do not already know and trust.

Money orders vs. other forms of payment

Money orders stand apart from other forms of payment, such as personal checks, cashier’s checks, certified checks, debit cards, credit cards or cash. How do money orders work, compared to other payments? These are the details to know: 

• Personal checks require the issuer to have sufficient funds in their account for you to get paid. If they do not have enough money to cover the check, both they and you may encounter bounce-back fees or other charges when you attempt to deposit the check.
• Cashier’s checks are different from money orders as they require a person to obtain one from their bank. Both cashier’s checks and money orders come with similar guarantees that you will be paid, but cashier’s checks are more secure.
• Certified checks are similar to cashier’s checks, except the funds are drawn from the check writer’s account rather than the bank’s own funds. 
• Debit cards differ from money orders because the funds are directly drawn from the payer’s bank account. If the payer does not have enough money to cover the transaction, both they and you may encounter processing fees.
• Credit cards can be safer than debit cards but come with the risk of chargebacks and credit card fraud. Either of these can prevent you from getting paid, unlike a money order.
• Cash is similar to a money order, although a less secure option. Cash can be stolen or counterfeited.

How to get a money order

Money orders of up to $1,000 can be easily obtained from a variety of sources.

Each of these requirements, as well as processing fees, vary by money order issuer, so be sure you research these policies before deciding where to purchase one.

How to cash a money order

You or a recipient of a money order can cash or deposit funds in several ways. Steps involved in cashing a money order are:

1. Bring your money order to a place that will cash it. Such places include the post office, a bank where you have a checking account, or grocery and convenience stores, among other places.
2. Endorse your money order. This means signing the back of the money order or wherever the order requires you to as the recipient.
3. Confirm you are the recipient of the money order. You can usually verify your identity with a state- or government-issued ID card or a passport.
4. Collect your funds. You will be able to convert your money order into cash or deposit it into a bank account, less any fees issued by the processing company used.

Funds from the money order go from one financial entity to the other, resulting in you receiving cash right away if you choose to.

Lost or stolen money orders

It’s important to confirm the identity of the money order’s recipient before you buy a money order. It’s difficult to reclaim a money order once it’s sent and cashed by fraudulent actors. 

If your money order is lost or stolen, you can take a few steps to try to reclaim the money order. You can track USPS money orders online, or have a money order replaced by submitting Form 6401 Money Order Inquiry. This does have a processing fee. Other issuers may also allow you to cancel a money order so long as it hasn’t been cashed yet, depending on their individual policies.

Is a money order right for you?

Money orders offer several advantages and disadvantages, depending on the situation in which they’re used, as well as your own financial setup. In many cases, money orders provide security and a guarantee of adequate funds. You can typically trust that a money order will get you paid reliably and that you can use them to pay people securely as well.

However, you may want to consider other options besides a money order. If you have questions about what payment options are available to you, you can seek out assistance from a financial professional before you buy a money order.