Money Orders: How They Work And Where To Get One

Money orders were first introduced through the United States Postal Service as an alternative to sending cash, helping to reduce robberies at post office locations. Today, money orders are still considered safer than cash. While there are many instances where this method of payment makes sense, others (like if you’re making a very large purchase) won’t.

What Is A Money Order?

A money order is a payment method that comes as a paper certificate, making it easy to confuse with checks. Because you have prepay for a money order, the funds are guaranteed. These can come in handy in a variety of situations where other payment methods may not be the best choice. For example, a money order may be a good option if you don’t have a bank account or if you need to send a payment through the mail securely.

How Do Money Orders Work?

What makes money orders a viable payment option is that they are easy to access, purchase and use. To get a money order, you’ll need to go to a provider then give the payee’s name and your address. Then, you will prepay the full amount that you need to pay, along with a small fee. You can purchase a money order with either a credit card, debit card, personal check or cash. Note that if you plan on using a credit card, it may be considered a cash advance and you can be charged additional fees. Once the money order is purchased, the recipient can then cash it, just like a check.

Even though checks and money orders are cashed in a similar way, money orders can’t bounce because the issuer has already physically provided the funds. This difference makes money orders more reliable than other forms of payment.

How Money Orders Work

Money orders are a popular form of payment because they are easy to access, purchase and use. To purchase a money order, you’ll need to find a retailer that sells them, or head to your local post office. In most cases, you’ll be asked to provide your information and the payee’s personal details. You will then prepay the full amount that you need to pay, along with a small fee.

Most retailers will only allow you to pay for a money order using cash or a debit card. Some may offer you the option to pay with a credit card, but the fees can add up as the purchase will generally count as a cash advance. If so, credit card issuers typically won’t offer a grace period — you will need to start paying interest immediately.

Where Can I Get A Money Order?

Some places you get a money order include:

• Post offices
• Money remittance retailers
• Credit unions
• Grocery stores
• Convenience stores
• Banks

How Much Does A Money Order Cost?

You can expect an average charge between $1 and $5 for a money order — the total cost may be more if you use your credit card. The table below highlights some common places to purchase a money order and their average costs for money orders sent within the U.S.:

How Do I Fill Out A Money Order?

The steps are generally the same no matter where you purchase one:

1. Fill in the recipient’s name. Fill out their legal name on the line that says, “Pay to the Order of.” Double-check to make sure it’s spelled correctly.
2. Provide your personal details. You will need to provide your own name and address so the money order retailer has this on file in case there are any issues.
3. Include the amount you want to purchase. Ensure that you wrote the correct amount. Some retailers have a maximum limit you can buy.
4. Write relevant information in the memo section. This space is for you to mention anything relevant, such as the purpose of payment.  If you’re using the money order to pay for a bill for example, you’ll need to provide your account number in the “payment for/account number” field.
5. Sign the money order. Once you’ve completed all the steps above, you’ll need to sign your name at the bottom on the line that says, “purchaser’s signature.” As proof of payment, keep the receipt for the money order.

The Pros And Cons Money Orders

There are both benefits and drawbacks of using a money order.

Alternatives To Money Orders

While money orders have their perks, other methods of payment may be more beneficial to use for certain financial transactions.

Personal Checks

A personal check is a check where you promise the funds are available in your bank account by the time the recipient requests payment. Once the payee cashes the check, their bank will request payment from your financial institution. However, payment isn’t guaranteed because funds are held aside in your account. This method of payment is best for those who are paying for smaller purchases or sending funds as an alternative to cash.

Cashier’s Checks

A cashier’s check is issued by a bank or credit union. A bank customer will pay the bank upfront and the financial institution holds onto the funds until the recipient cashes the check. It is the bank in this instance that guarantees payment. A cashier’s check would be a good option for larger sums of money that must be issued safely, like for a vehicle purchase. It may also be a better fit if your bank doesn't charge a fee to issue a cashier’s check.

Wire Transfers

A wire transfer is an electronic transfer of guaranteed funds and is a quick way to send money. While they do have higher fees than both money orders and cashier’s checks, you’re able to transfer a much larger amount. You and the recipient will need to have a bank account.

Online Payments

You can use your bank to make an online transfer or use payment apps such as PayPal or Venmo. It’s relatively easy to track to see if the funds got to your recipient. In most cases you don't have to pay any fees. However, bank transfers require that both the sender and recipient have a bank account.

Money Order FAQs

Where can I cash a money order?

You can cash a money order at the place where it was issued. For example, if the money order was issued at the post office, you can cash it there. 

How do I avoid fake money orders?

To avoid fake money orders, examine the paper and check the serial number online to verify its legitimacy. Also check to see if any part of the money order has been tampered with, such as faded writing in places or an unusually large payment amount that you weren’t expecting.

Can I buy a money order with a credit card?

Some retailers and financial institutions will allow you to purchase a money order with a credit card. However, some credit card companies may view this transaction as a cash advance, which can cost you high fees.

How can I cancel a money order?

You may be able to cancel a money order by contacting the issuer. Typically, you’ll need to provide the receipt and the tracking number. There may be a cancellation fee involved.

The Bottom Line 

A money order is a prepaid, paper method of payment that can be a great way to pay for bills, smaller purchases or to send money to a recipient within or outside of the U.S. Because they’re prepaid, they offer more security than cash or a personal check while guaranteeing funds for the recipient.

However, money orders have limitations and as a recipient, it's important to watch out for scams. Learning about the basics of money orders and other payment methods can help you make the right decisions for how you transfer your hard-earned money.

To stay on top of all your spending, sign up for the Rocket Money^SM app where you can create custom categories to track expenses from subscriptions to money orders.