Woman looking at her computer reading about money orders.

What Is A Money Order?

Ben Luthi7-minute read
December 04, 2021

If you're looking to make a payment or complete a financial transaction, a money order can be a good alternative to cash or a personal check. Before you buy one, though, it's important to understand how money orders work, where to get them and what your alternatives are.

Money Order: Definition

A money order is a paper payment method that's similar to a personal check. You can use a money order to pay for goods and services or make bill payments.

But unlike paper checks, which are drawn from a checking account, a money order is prepaid, which means the funds are guaranteed. As a result, some recipients may prefer or even require them because there's no risk of them bouncing like a personal check might.

How Do Money Orders Work?

To get a money order, you must purchase it from a provider. You'll generally need to pay a small fee, but some financial institutions may waive the fee for certain customers.

Like a personal check, a money order is written out to a specific payee, and both you and the receiver must sign the document.

Money orders typically have a limit of $1,000, so if your transaction amount is higher than that, you may need to purchase multiple money orders or use another payment method, such as a cashier's check.

How To Get A Money Order

You can get a money order from a bank, credit union, the U.S. Postal Service (USPS), Western Union or certain retailers, such as Walmart, Kmart and others.

Because money orders are prepaid, you must provide the payment upfront in the form of cash or a debit card – you generally can't use a credit card to buy one. You'll also be charged a small fee, which can vary depending on the provider and, in some cases, the amount of the money order.

When To Use A Money Order

There are a few different situations where it might make sense to use a money order instead of cash or a personal check. Some examples include: 

  • Paying bills such as rent or utilities
  • Sending money securely in the mail
  • You don’t have a checking account
  • Your check might bounce
  • Your money is being sent internationally

If any of these describe your situation and your transaction is under the $1,000 limit — or you're willing to purchase more than one — consider a money order as an option.

Where Can I Get A Money Order And How Much Does It Cost?

There are several different places you can get a money order. Here are some of the more popular options and what you can expect to pay:

Location

Cost

Walmart

Up to $1

Kmart

Up to $1.50

Money transfer agents

Fees vary by location

The U.S. Postal Service

$1.45 for orders up to $500; $1.95 for orders up to $1,000

Military money orders (USPS)

$0.50

International money orders (USPS)

$10.50

Banks and credit unions

Fees vary depending on the financial institution

How To Fill Out A Money Order

The process of filling out a money order is relatively simple, but it can be confusing if you're using one for the first time. Here's a quick summary of the steps.

1. Fill In The Recipient’s Name

The recipient is the person who is receiving your money. You’ll fill in the name of the recipient on the line that says, “Pay to the Order Of.” This recipient is the only person who can cash the money order, which cuts down on the likelihood of fraud.

2. Write Your Address In The Purchaser Section  

Since you’re the individual purchasing the money order, you’ll have to include your information as well. You’ll need to fill out your address in the purchaser section. By providing this information, it’ll be easier for the recipient or their bank to contact you if there’s a problem.

3. Add Your Account Number

If you’re purchasing the money order to pay a bill, you’ll need to include your account number. You can enter the account number in the “payment for/account number” field.

4. Sign The Bottom

Once you’ve filled out all the necessary information, you should sign the money order at the bottom. You’ll fill this out on the line that says “purchaser’s signature.” Without your signature, the money order can’t be cashed.

Make sure you don’t sign the back of the money order. Like a personal check, this line is for the recipient to sign before cashing the money order.

5. Keep The Receipt

Once you’ve finished purchasing the money order, make sure you hang onto your receipt. The receipt is your proof of payment, and you may need this if there’s a problem later. The recipient will also have tracking information, so you’ll be able to verify with them that the money order was received and cashed by the recipient.

Pros And Cons Of Money Orders

There are both benefits and drawbacks of using a money order to purchase a good or service or to make a bill payment.

Pros

  • Funds are guaranteed and trackable
  • Does not include your bank account information
  • Can be issued in a different country than it’s cashed in
  • No bank account required

Cons

  • Must pay a fee to purchase one
  • Must be purchased in person
  • Risk of spam and fraudulent money orders
  • Low maximum amount

Money Order Alternatives

Depending on your needs, a money order may or may not be the best way to complete your financial transactions. Here are some alternatives to consider and when they're worth using.

Cashier’s Checks

Cashier’s checks are similar to money orders in that they are issued to a specific payee, and the funds are guaranteed. But unlike money orders, cashier’s checks can only be purchased at a bank or credit union. They are also available for larger amounts, whereas money orders limit you to $1,000.

Wire Transfers

A wire transfer is an electronic transfer of guaranteed funds. Wire transfers do come with higher fees than money orders or cashier’s checks, but they can’t easily be faked or canceled. They can be especially beneficial if you need to send money internationally.

Electronic Payments

Electronic payments are an acceptable form of payment for things like bills and utilities. These payments are typically made through your online banking platform. Also, peer-to-peer apps like PayPal or Venmo allow you to exchange money with friends and family members quickly and often at no charge.

Personal Checks

Unlike money orders or cashier’s checks, personal checks aren’t guaranteed. But most businesses, like utility companies or phone companies, will accept personal checks.

Cash

If the transaction is simple and in-person, cash can be a straightforward way to complete your purchase or transfer of money without additional steps.

How To Cash A Money Order

If you've received a money order, you'll need to sign the back of the money order and provide photo identification to prove that you're the recipient. You can then cash it or deposit it into your bank account.

If you cash the money order at retail stores, convenience stores or similar places of business, you may be charged a fee for the process. The same goes if you try to cash a money order with a bank or credit union where you're not a customer. So if you have a bank account, it's generally best to cash or deposit with your financial institution.

Additionally, you can cash a USPS money order at any post office for free.

Where To Cash A Money Order

You can generally cash a money order at the same places that provide them. That includes banks, credit unions, post offices, retail stores and more. In some cases, it may make sense to cash it with the same entity that issued it, especially if there's no fee involved.

But if you're going to be charged a fee, consider cashing or depositing the money order with your bank or credit union.

How To Spot A Fake Money Order

Unfortunately, money orders are often used by scammers to either pay other people or to request payment. As such, it's important to know what to look for when you're being offered a money order.

  • Examine the paper: Money orders come in different sizes and designs, so check for the provider online to get an idea of what it should look like. For example, USPS money orders have watermarks of Benjamin Franklin on the left side and a vertical thread with the letters "USPS."

  • Check the dollar amounts: If the dollar amount looks discolored, it may have been erased and reprinted with a higher denomination. And remember, money orders cannot be higher than $1,000 in the U.S., and international money orders won't exceed $700.

Also, consider the circumstances surrounding the money order. If someone is asking you to deposit one into your bank account on their behalf or wants to send you a money order worth more than what you're selling and asks you to send them the difference, it's likely a scam.

Money Order FAQs

Do money orders expire?

Money orders don’t come with an expiration date. However, if you wait too long to cash them, you might have to pay a service fee. This time limit should be identified on the back of the money order.

Can you buy a money order with a credit card or debit card? 

The easiest way to pay for a money order is with cash or a debit card. If you purchase a money order from a bank, then you can usually transfer the money directly out of your savings or checking account.

In the past, certain providers, like Western Union and 7-Eleven, have allowed customers to purchase a money order with a credit card, but that's no longer the case.

I lost my money order, how can I cancel it?

If your money order has gone missing and hasn't been cashed, you can cancel it by contacting the issuer. You'll typically need to provide the receipt and its details, including the tracking number, date and location of purchase and amount. You'll also typically need to pay a cancellation fee.

Depending on the provider, you may be able to submit your cancellation request in person or via email, fax or mail.

The Bottom Line

A money order can be a great way to pay a bill, make a purchase or send money to someone else because it provides more security than cash or a personal check and also guarantees funds for the recipient.

However, there are some additional steps to getting a money order, and as a recipient, it's important to watch out for scams. Make sure you understand the process and also some alternatives to ensure that you use the best payment method for the situation.

You can learn more about money and other personal finance topics in the Financial Learning Center.

Ben Luthi

Ben Luthi is a freelance writer who covers personal finance and travel. He has a B.S. in Business Management with an emphasis on Finance from Brigham Young University.