The U.S. Postal service gives out around 245,000 money orders every day. In 2020 alone, the postal service gave out 77.1 million money orders, and that’s only one of the many locations that offer money order services.
As you can see, money orders are not rare or fringe. They help millions of people make secure and quick transactions. At the same time, they aren’t as common as credit cards, debit cards, and checks, so many people don’t fully understand how they work.
If you need to provide a money order, or you’re interested in using them more for your transactions, read this guide to learn everything about this form of paper payment.
What Are Money Orders?
Money orders were first created by American Express in 1882, so the concept is not new or uncommon. They were later called “traveler’s checks,” which became a popular form of payment. The basic idea is that money orders are checks that don’t need a savings or checking account.
Like personal checks, money orders are paper documents that symbolize financial value. Both checks and money orders are set to a certain amount of money in exchange for you forfeiting the money. Similarly, you can make out, cash, and even cancel both before the payment.
While checks don’t need a guarantee of payment, money orders cannot bounce. This is because you must pay in advance for a money order. You must buy one with cash upfront and you’ll also have to pay a service fee.
When you get a money order, the employee will hand you a paper document to fill out with information, and then you can send the money order as a form of payment. Many serious transactions ask for money orders as one of the options for payments because of their money guarantee.
Money orders can be redeemed for cash at a money order counter or financial institution, or used to pay off bills and debts. When used for the latter, the receiver will have to cash or deposit the money order themselves.
How Can You Get A Money Order?
When you’re in need of a money order, you probably won’t have to worry about access to them. There are many places that offer a service for purchasing money orders, even in stores you wouldn’t expect. For example, you can look for money order services at:
- Banks
- Credit Unions
- Gas stations
- Grocery stores
- Post offices
- Big box stores
Try visiting these local places or searching online for the nearest service counter. Keep in mind that banks and credit unions tend to charge more in service fees than other places like grocery stores.
Once you find the place to get your money order, you’ll need to follow a process to secure one. First, you’ll need to identify who you are sending money to and how much. You must fill out a document with all this information in order to receive the money order.
If you need more than $1,000, you’ll have to buy multiple money orders. Most money orders are limited to $1,000, which means you’ll have to pay a service fee for each one.
The service will need to keep a record of your name, the amount to be cashed, and the name of the payee. You should also keep good records of this in case something goes wrong, including your receipt. Money orders are not as trackable as checks, so loss or damage in any way is riskier.
Because the money order was paid for upfront, that money is gone once the money order is gone. It is much harder to prove that a money order was lost and not used.
How to Pay for a Money Order
In some places, you might be able to pay for a money order using a credit card. This method, however, poses a bigger risk to money order services. As a result, they’ll charge even more for the service.
In general, it is better to pay for money orders in cash or with a debit card. This allows the service to know they are guaranteed payment for the money order. In most places, like the post office or big box stores, it’s not an option to use a credit card for money orders.
Domestic money orders typically have service fees between $1 and $5. You can get international money orders, but they’re more expensive.
What If I Make a Mistake or Lose My Money Order?
In certain situations, canceling money orders or getting refunds is possible. In these situations, it’s vital that the money order has not been cashed. Typically, institutions will ask for ID before cashing a money order to make sure that the receiver is verified, but it doesn’t always work that way.
It’s essential that you’ve kept your receipt from the money order, and bring the money order itself if you have it. If you’ve lost it, you’ll have to use your receipt to fill out paperwork and pay a fee.
These fees can vary, but it’s typical to have to pay $15 for a replacement money order. It can also take quite a while to get your claim processed, sometimes a month or longer.
Receipts are the resource you have to make money orders trackable. Depending on where you’ve gotten your money order, you might be able to track it online with the serial number and amount. However, without a receipt, you’ll have to pay for a research request by the issuer, which can cost around $40 and take 2 months.
Where Can You Use Money Orders?
Money orders are popular for paying bills and debts. They are also popular for people who don’t have a bank account or want to make sure their payment is secure. If you’re looking to cash a money order you’ve received, you can try all the places that they are typically given out.
Your best bet in cashing a money order is to go to the same institution that issued it. You can cash them at the bank branch or post office that issued the money order, or you can pay extra fees at the convenience store or a check-cashing location.
An alternative to cashing a money order is to deposit it. If you have a checking account, you can go to the bank and deposit it as if it were a check. You can also deposit them at the ATM or through your mobile banking app.
Just like with checks, make sure you endorse the back of the money order before you deposit.
Benefits of Money Orders
Money orders have lasted so long and are still popular today because of their many benefits. As you have learned so far, they make financial transactions more accessible and guaranteed. If you follow some rules that ensure safety and security, money orders are one of the best ways to pay or get paid.
Increased Accessibility
Using a money order is one of the only forms of payment that is accessible to all people. Banks and credit unions keep their services available to only certain people based on their financial status. For example, banks can deny loans because of poor credit and the inability to prove assets.
Money orders are available to anyone who can pay upfront to purchase one. You don’t need a bank account anywhere, and you don’t need a credit card or proof of assets. You don’t even need a credit score.
Anyone can walk up to a money order service and pay for a money order, making it a very accessible form of payment. It is also an accessible form of receiving money from someone else, because you also don’t need a bank account, credit score, or any proof of finances to cash a money order.
Safe and Secure
Traveler’s checks, now money orders, have always been popular for their security because they’re safer than checks. Someone who obtains or even sees one of your personal checks can get your bank account information because checks directly link to your account. Money orders, on the other hand, do not need any financial information listed outside of the amount they represent.
In addition, checks made out to cash do not ensure the identity of the person cashing them. Because no person is identified on the check, no one has to see an ID to verify the person’s identity. On the other hand, money orders require the identity of the person paying and the person receiving the payment, and you must show an ID to cash or deposit.
Money orders are also much safer than cash because cash does not have tracking capabilities. You can track your money order with your receipt, but cash is gone once it is gone. Mailing cash, therefore, is extremely risky.
Easy to Obtain and Use
Money orders are neither a foreign concept nor difficult to obtain. Money order services can be found in so many different places. It is very rare that a person doesn’t have easy access to money orders in their area.
Money orders are so easy to find because you don’t have to get them from a bank. Any storefront can choose to offer money order services by partnering with a money order provider.
Money order services are also quick and easy because you don’t need to apply or wait for one to issue. The process of getting a money order is as easy as stepping up to the counter, filling out a form, and walking away with it.
Digital payments can be complicated because of the extensive information they need. Money orders are very easy to use because you don’t need to fill out any complicated financial information. You won’t need to know your account and routing numbers like you would with a bank transfer.
Stops Checks From Bouncing
A popular reason to use money orders is that they don’t run the risk of bouncing like checks. Many creditors or sellers request money orders because they know they are guaranteed payment. With checks, you could receive them and find out that they are empty promises at the bank.
If you are looking for payment from someone you don’t trust, money orders are a great way to ensure you won’t receive a bounced check. If you aren’t entirely sure that your account won’t bounce a check when you send one, you can choose to use a money order instead to avoid penalty fees.
Secure International Transactions
Finally, many people like money orders because they can ensure more secure international transactions. While you will have to pay higher fees to obtain an international money order, it will keep your bank accounts safe and ensure that the receiver is properly identified before cashing.
As previously mentioned, sending cash in the mail is extremely risky, and sending bank account information for wiring money is even riskier.
Cons of Using Money Orders
As with all forms of payment, there are also risks and negatives. Money orders can keep your bank accounts safe, but they aren’t entirely secure from scams and abuse. Money orders are common forms of payment for scams because once sent to a scammer, money orders can be cashed and never refunded or canceled.
It’s also possible that you can receive a fake money order, leaving you without payment. When receiving a money order, always check for validity. When sending money, always be sure that the person deserves your money.
In addition, a big downside is fees. You’ll have to pay service fees to obtain money orders. You’ll also have to pay replacement fees if your money order is lost, damaged, or not written out properly.
Finally, you must obtain your money orders in person, and the limit is usually $1,000. While you can typically access other forms of payment on your own and with less strict restrictions, money orders are more limiting.
Looking For a Better Form of Payment?
Money orders are a great option for a lot of people. They are accessible and secure, but they’re still restrictive. In addition, if you don’t have money to pay for them upfront, then you’re out of luck.
If you need to pay for bills or debts right now, but you don’t have the money, you can apply for small loans and get paid within a day. Rapid Cash allows you to apply and get approved in minutes so you can take care of your financial needs right away. Apply now!