What Is a Money Order & How Do They Work?

Taking care of your financial obligations is important, but it can be difficult if you find yourself in a situation where check or cash just won’t do the trick. Money orders are a safe and convenient way to send money.

money orders

While they might seem a little out of date, they remain a strong option for many individuals. Read on to find out what exactly they are, why you might want to use one, and how the process works.

What is a money order?

Similar to a check, a money order functions as a prepaid payment where both you and the recipient must sign in order for it to be cashed or deposited.

The key difference is that money orders are actually safer than using a personal check because the funds are guaranteed by a third party, typically wherever you bought the money order from. Most only cost a few dollars, so it’s a relatively inexpensive way to send secured funds as needed.

When you buy a money order, you pay the amount you want it to be worth in addition to a small processing fee. It usually costs just a few dollars or less, but the charges vary depending on where you buy it.

Once the recipient gets your money order, they can cash it at a bank or credit union just like they would any other check. They simply need to sign it and provide a valid photo ID. Then, they either get the cash or deposit the funds into their bank account.

This flexibility makes using them an easy, convenient way to send money. They also offer a number of perks and safety features that you may not find with other forms of payment.

How do money orders work?

Using a money order can come in handy for a number of reasons. Most importantly, it’s a safe and efficient way to pay for bills if you don’t have a checking account. In fact, nearly 8% of all American households don’t have any sort of bank account.

Since it’s difficult to pay online without a credit or debit card and sending cash in an envelope can be risky. Using a money order protects your payment from the time you drop in the mailbox until it’s deposited by the recipient. You never have to worry about it being lost or stolen and then having to make the payment a second time.

But you might find it beneficial to use one even if you do have a bank account. For instance, some bills take a while to be cashed and you might be worried about keeping track of pending payments in your bank account.

Avoid Fees

Rather than run the risk of having a check bounce, a money order is prepaid and guaranteed so both you and the recipient know that it won’t bounce. That also saves you from worrying about having to pay a fee for insufficient funds. Most creditors charge a hefty fine if they have to send back a bounced check.

Depending on the timing, your payment could also be considered late by that point, causing you to incur even more fees. Money orders away any doubt that the payment is good.

In fact, many businesses and landlords don’t even accept personal checks. A money order may be your best bet to avoid sending (and potentially losing) cash to cover your obligations.

International Use

Money orders also come in handy when you want to send money overseas. Again, you’re guaranteed a level of protection since the funds are guaranteed. While mailing one isn’t as fast as sending a wire transfer, it is much less expensive.

An international wire transfer typically ranges between $35 and $45, but the United States Postal Service offers international money orders for less than $5. You can purchase one worth up to $700 and use either cash, a debit card, or a traveler’s check to pay for it.

Prevent Identity Theft

Another great reason to use a money order is to avoid identity theft. Even if you decide to mail a personal check instead of cash to pay a bill, the envelope could still be intercepted by someone who wants to steal your bank account number and routing number from your check.

They might even place the check back in the mail so you don’t notice that anything unsavory has happened.

You could have small amounts deducted from your checking account and not even notice if you don’t pay careful attention to your debits. Using a money order removes this risk completely because none of your bank information is included anywhere on the document.

Where can you get a money order?

There are many convenient locations where you can purchase a money order. The cost will likely vary depending on where you go, so if you have time, it’s best to compare the price before you buy one. This is especially important if you plan on buying them regularly, like to make your rent payment each month.

Your Local Post Office

One easy option is the U.S. Post Office. Not all locations provide this service, but most do. You can purchase a money order worth up to $500 for $1.20 and from $500.01 to $1,000 for $1.60.


You can also buy them at certain retailers. Usually available at the customer service desk, many grocery stores, pharmacies, gas stations, and convenience stores like Walmart, Kmart, Safeway, Kroger, Meijer, CVS, & 7 Eleven sell money orders. They usually cost around $1.

Credit Unions or Banks

Another option is to go to your local bank or credit union. You’ll likely have to pay anywhere between $5 and $10 for the service, so it’s probably not the best option for a regular payment. However, for a one-time convenience, it might be worth it.

Money Store

The final place to purchase money orders is at a money store. The most well known and trusted name is Western Union, which offers domestic money orders online, in person, or by the phone.

Other stores like payday lenders and money transfer services may provide money orders, but you need to make sure they’re reliable in order to avoid getting scammed.

That brings us to another word of caution regarding buying money orders online. If you take this route, make sure you select a company you know and trust. It’s also important that your recipient feels the same way. You should both be comfortable with the origin of the money order so you don’t have to worry about scams or outrageous fees.

Also, note that most places require you to use cash, check, or a debit card to purchase one. Credit cards typically aren’t accepted as a form of payment.

How can you track a money order?

Companies and financial institutions offering money orders take special care to ensure the safety and security of your funds. First of all, you’ll receive a receipt as proof of payment.

It will either be a carbon copy or a separate receipt that includes all the pertinent information regarding your purchase. Be sure to keep this information safe in your records in case you need to reference it in the future.

Another important piece of information you’ll receive after buying a money order is a tracking number. Similar to tracking a package in the mail, you can use your money order’s tracking number to confirm that your recipient did indeed receive it.

If your money order gets lost or stolen, you can take your receipt and tracking number to the location where you purchased it and get help.

Typically, your options are either to get a refund or get a replacement money order. Some places may charge a fee so that may be something to consider when deciding where to purchase your money order.

But if the money order is worth a lot of money, then a $15 replacement fee may not seem like much compared to the thought of potentially losing all that cash with no chance of getting it back.

Bottom Line

If you don’t want to send checks or cash, or you have a creditor who prefers to be paid by money order, this convenient form of payment can make taking care of bills a lot easier (and risk-free) for all parties involved. For just a small fee, you get to send funds that are third-party guaranteed and trusted by both you and your recipient.

Lauren Ward
Meet the author

Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. She has written on personal finance issues for over six years and holds a Bachelor's degree in Japanese from Georgetown University.