Money Order Basics: What You Need to Know About Money Orders

Money Order Basics: What You Need to Know About Money Orders

It’s the electronic age, and most of us probably think that the best way to send money is to do it electronically. There’s a slew of online remittance services, e-wallets and electronic fund transfers that allow you to transfer money in an instant, but when it comes to traditional methods, money order proves to be one of your best options.

There are several instances when money orders make sense and, in some situations, it proves to be the best payment method. Most people consider money order as a sound alternative to checks, especially if you don’t have a bank account or don’t want to divulge your bank details.

But what is money order, how does it work, and how safe is it? Today, you’ll learn more about money order and see why it’s still relevant in the modern day.

What is a money order?

A money order is a type of prepaid payment method that allows you to send or receive money domestically and internationally. It works in almost the same way as a check, but the difference is that you pay for the money order first before sending it to the recipient.
The recipient then cashes it or deposits the amount into his account. A money order is a safe and reliable way to send payments, and it’s also relatively cheap compared to other methods. Also, a lot of individuals and institutions accept money order as one of their preferred payment methods.

Characteristics of a money order

A money order is regarded as a reliable payment method by most. It functions almost similar to a check, but with these specific characteristics:

  • A money order is guaranteed. Because you pay for money order before it is sent to the recipient, it ensures that the receiving end will actually get the money. You won’t have issues like a bouncing check, which could happen when you’re dealing with personal checks.
  • You specify the payee. A money order won’t work if you don’t write down who exactly is going to receive it. You need to specify the name of the individual or organization that’s going to receive the money. This makes it more difficult for thieves from trying to alter the details of the money order.
  • Wide availability. While the bank is always a good source for money order, you may also process money orders in other places, such as supermarkets and convenience stores (think Walmart and similar establishments); the post office, money transfer establishments, and credit unions.

Why would you need one?

Money order proves to be a sensible payment solution, particularly in circumstances when cash or check are impractical. A money order is especially useful when:

  1. You don’t want to deal with bouncing checks. Personal checks are acceptable, but if the account doesn’t have enough funds, the check could bounce, and you’ll face some hefty fees. Money order allows you to send and receive money, knowing that the amount is always funded.
  2. You don’t want to divulge your banking information. Unlike checks, money orders aren’t tied to banks and other financial institutions. You don’t even need a checking account to get one. Whether you don’t want to reveal your banking information or don’t have a checking account, money orders can be a great way to transfer funds, specially to people you don’t know personally.
  3. You’re sending money through the mail. Sending cash through the mail is never a good idea. Someone can take ahold of the money, or the cash could get lost somewhere. Your recipient doesn’t have the full guarantee of getting that money. Money orders, on the other hand, are certificates or papers, and are not cash. Even if the money order ends up in the wrong hands, they won’t be able to cash it out if the order wasn’t named to them.
  4. You need to pay bills, but you don’t have a checking account. Not all people have a checking account, which sometimes, could get in the way in paying your bills. A lot of billers accept money order as an acceptable payment method, so it should work just as great as checks would.
  5. Transfer funds overseas. Sending money abroad can get expensive, and the money order is the relatively cheaper option. You can send international money orders to various countries including most Latin American countries, Bahamas and Japan. The recipient can also cash in the money order to their country’s currency.

Where can you get one?

Money orders are widely available in a lot of places, including but not limited to:

  • Groceries and convenience stores
  • Money transfer agents
  • Banks and credit unions
  • US Postal Service

Every money order transaction carries a nominal fee. If you’re looking to save money, consider checking out the stores and establishments first because they tend to have the lowest fees. Walmart, for instance, charges only up to 88 cents for every transaction. Money transfer agents like Western Union are cheap as well, charging you around $1. US Post Office may charge you to up to $1.70 for money orders amounting to $1000. Meanwhile, banks and credit unions charge the highest fees, typically at $5.

Money orders are suitable for smaller bills and debts. You cannot send more than $1000 in one transaction. If you’re paying or sending more than this amount, then you need to do multiple transactions. You can pay for money order in cash or using your debit card. But keep in mind though that using the credit card may not be a great idea because it may be taken as a cash advance and you may be charged expensively for it.

How to get a money order

Getting or buying money orders is a fairly simple and straightforward process.

  1. Identify the best place to get a money order from. You can check out groceries and convenience stores in your area and compare the fees.
  2. Prepare what you need. Bring cash or debit card with you. Take note of the recipient’s name and address. Also, bring a valid ID.
  3. Fill out the money order form. Indicate the recipient’s name when you see something like “Pay to the order of.” It could be the name of the person or institution you intend to send money to. This should be the first thing you write on to ensure that the money order will go the intended recipient. Next, fill out the purchaser section. Indicate your name, address, and contact number (if the form requires the latter two). Write your signature.
  4. Write legibly using a black ink gel pen. Double check the details of the order as you can no longer correct it if it has already been sent. Also, don’t leave any fields blank as this can be an open invitation for scammer and fraudsters to alter the money order.
  5. Keep the records of the transaction. You should be given a receipt containing the details of the transaction.
  6. Track the money order. You’ll also be provided with a tracking number so you can track whether or not the recipient has received and cashed in the money.

If you are the person receiving the money order, you might wonder where you can turn the document into cold hard cash. Well, the best would be at the establishment that it was issued. For instance, if the sender sends you the money order through the US Postal Office, then it’s a good idea to have the money order cashed in at the postal office as well. You may have to pay some fees when you cash in, and you’re required to show identification.

You also have the option to deposit the money order into your bank account instead of cash it in. Make sure to sign the back of the paper as you would a check before turning it over for deposit.

Types of Money Order scams to avoid

Money orders are most times, reliable and safe, but they’re not foolproof. Scammers and fraudsters are always coming up with ways to try to rob you with your money, so identifying common money order scams, so you don’t get ripped off.

The excess scam

The excess scam is a common approach that fraudsters use, especially for people selling online. In this modus, a scammer agrees to purchase your item. He sends you the fake money order, you ship the product, and you thought all is well. But then, the scammer contacts you, saying you’ve been overpaid. He then asks you to send the excess money somewhere else, perhaps via online remittance service. Once you send the money, you’ve lost your product plus you’ve given the scammer some extra money to boot.

Bogus buyer

This scam is pretty straightforward. A person tells you he’s interested in purchasing your product and he’ll send payment via money order. You’ll receive the fake money order, and he’ll get the item. It would go on like any typical purchasing process. But by the time you’ve discovered the money order is fake, you would already have sent him the product, and there’s no other way to contact the scammer.

Deposit assistance scams

This scam is the subtle version of money laundering. First, a person approaches you telling you that he’d like some assistance depositing his (fake) money order. But the problem is, he doesn’t have a bank account, and if you’d be so kind as to deposit on his behalf and he’ll just pay you for it. You think it’s harmless enough to help another person in distress, but then you find out that the money order is fake, but it’s now too late.

Rental reversal scam

This scam often happens among people involved in the real estate business. A potential renter sends you a money order covering rent and security deposit. But at the last minute, the person contacts you again, telling you there’s been a change of plans and if you could so kindly send the money back to him. In some variations, the scammer may even tell you to keep the rent amount but send back the security deposit. You didn’t realize that you’ve received a fake money order, but now you’ve already sent the money back to him.

Scammers can get manipulative. They make a sense of urgency and appeal to your emotions (fear, sympathy, intimidation, etc.). Since it takes around a week before banks and credit unions discover that the money order is fraud, they’ll usually make you think that you don’t have that much time and you should send them the money right away. But when your gut tells you the story is too good to believe, then trust your gut – it most probably is.

How to avoid money order scams

Being victimized by money order scams can be stressful, so it helps to pay attention so you can avoid these fraudulent activities. Here are the best ways to steer clear of scams and send and receive only legit money orders:

  • Only send or receive money orders only from people you know. If you’re an online seller and you can’t help but deal with people you don’t know, you could perhaps ask them for a safer alternative payment method.
  • Be cautious of the red flags. If someone asks you to send money via remittance or fund transfer after he sent you a money order, the alarms should go off.
  • Look for signs of tampering and forgery. Money orders have counterfeiting features that you could check with to ensure you have a valid and legit money order in your hands. heat-sensitive inlays and watermarks are some of the money order security features coming from money transfer agents like Western Union. Also, scammers may try to tamper with the amount by adding extra zeroes in it. If it’s not the amount that you expect, it’s time to get suspicious.
  • Don’t spend the money order until it’s cleared. You want to wait and make sure the deposit will go through or that you can cash in the money order.
  • Keep your records. Finally, don’t throw your receipts. You’ll need to refer back to them should something go wrong with the money order.


A money order is typically safe and reliable, and sometimes, it may just be the only best way to send or receive payment. However, because it’s so popular and easy to alter and forge, a money order can also become a hot target for scammers and fraudsters. If you’re using money order in some of your financial transactions, then it’s best to recognize the red flags and check out viable alternative methods so you can secure the money, worry-free.