How Money Orders Work: When to Use and Where to Buy

Fact: In our digital world, it’s far easier and preferred to pay via debit, credit, or even your Chime Visa® debit card. Also fact: Digital methods aren’t always accepted and/or you may be concerned about your privacy and prefer to use an old-school form of payment.

Enter the money order.  If writing a check is foreign enough, you may be scratching your head. What exactly is this money order you speak of?

Money orders are considered a more secure form of payment compared to personal check or cash. In our Money Orders 101, we’ll give you the low-down on what money orders are, why and when to use them, and where you can buy them.

What Is a Money Order?

If you put a money order next to a personal check, they look like cousins. Similar to paper checks, money orders are issued in the form of a paper document, and they are used when you want to pay for something. When you want to purchase a money order, you need to provide money upfront. And because of that, money orders ensure the receiver that they will get their payment.

One more thing to know: Instead of being backed by your personal bank account, like a check, a money order is backed up by an agency or large corporation. This makes it is a more secure form of payment to the recipient.

Here’s when to use a money order vs. a personal check:

  • The receiver of the funds doesn’t want to run the risk of getting a bounced check.
  • The person issuing the payment may need to cancel payment. For instance, if you believe the money order was stolen, you can pull the plug on issuing the funds.
  • You want to protect your privacy. Money orders don’t include bank account information.

You may want to use a money order in lieu of cash for the following reasons:

  • You want a receipt as proof of having made a payment
  • If you’re worried about losing the cash (either misplacing it or having it stolen)
  • If you have to pay an ATM fee to withdraw cash

How Do Money Orders Work?

In a nutshell, you go to a place that sells money orders (which we’ll go into in just a bit), and fill out the necessary information. You can buy a money order with cash or debit card. And if you’re ordering one from your bank or credit union, you can transfer funds from your savings account.

Because you need to have the money upfront to purchase a money order – meaning they are prepaid – they are a more guaranteed form of payment than personal checks.

Best Ways to Use Money Orders

Money orders come in handy for a number of reasons. You can use them for the following scenarios:

Paying for rent  

There are many benefits to paying your rent with money orders. The first is a paper trail. You receive a receipt attached to the money order as proof you’ve paid your rent. And, if you lose the money order, you can file a claim to get your money back. Some places also allow you to track your orders online, so you can see when your landlord receives the money order. This way you’ll ensure the money gets in your landlord’s hands. Plus, you have proof you sent payment on time. Lastly, money orders are immediately withdrawn from your account so you can purchase a money order and rest easy that you won’t overspend and not be able to pay your rent.

FYI: If you’re having trouble staying on top of rent and bills, see how Chime can help you get paid early with direct deposit.

Buying items from a seller on marketplace like Craigslist or LetGo

If the recipient doesn’t know you and wants a secure form of payment, he may ask for a money order. Think of in-person transactions, such as buying something on an online marketplace like OfferUp or LetGo. In this scenario, you may meet up with the seller to exchange goods for moola.

When it’s unsafe to send cash

Did you get wind of that postal worker who stole 6,000 greeting cards with cash, checks and gift cards? While she couldn’t cash those checks, she  was privy to sensitive bank account information. And instead of sending cash, which could end up in the wrong hands, only the recipient can cash in on a money order.  If you don’t have a safe place (away from home) to keep your money, then paying your monthly rent and utility bills via money orders are the way to go.

How to Fill Out a Money Order

Filling out a money order is pretty straightforward.

You’ll need to include basic information, such as:

  • Your name
  • The name of the recipient
  • Possibly your address and phone number. Pro tip: If you want to retain your privacy, ask if this information is necessary.
  • There may be a memo area to fill in with notes
  • You may need to sign it with your John Hancock (aka signature)

Not sure if you’re doing it right? Don’t be afraid to ask the salesperson or bank teller for guidance.

Where to Buy Money Orders

You can purchase a money order from:

  • The U.S. Postal Service. Every U.S. post office accepts debit cards as payment for money orders. You can find a post office near you using the USPS locator.
  • Money transfer outlets, which include places like Western Union or MoneyGram, as well as some convenience stores, drugstores, supermarkets and check-cashing outlets. Even some major retailers like Walmart may offer a counter where you can buy a money order.
  • Banks and credit unions.

Money orders typically have a $1,000 limit. Plus, there’s a small fee. If you get one from the post office, for example, the fee is $1.20 for any amount up to $500, and $1.60 for amounts between $500 and $1,000. And, if you get a money order from CVS, there’s a 99 cent fee for a $500 limit. So, if you need more than $1,000, you’ll likely need to purchase multiple money orders.


 

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