Banking Basics 101: Money Orders

Banking Basics 101: Money Orders

Money Orders are monetary instruments that order a specified amount of money to be paid to someone else. Given that Money Orders are paid for in full at the time of purchase, they are considered a guaranteed form of payment to the recipient.  

People who do not have checking accounts will commonly use Money Orders, because they serve as an alternative to personal checks. Money Orders are also a secure way to send money, because if cash is sent in the mail and lost, it is gone for good. Money Orders are traceable and can be replaced if lost or stolen (they typically come with a purchaser’s receipt that can assist in tracing).  Another benefit to using a Money Order is when paid for out of a bank account, the money is automatically debited from your balance so you are not at the mercy of the recipient cashing it unexpectedly. Bank accountholders may find this helpful for managing their finances and keeping a balanced register.   

If you do not have a bank account, don’t fret, there are plenty of options for purchasing a Money Order. Most banks will sell Money Orders to non-customers, and you can also look to your local grocery store, gas station or check-cashing service who may act as vendors for Western Union and MoneyGram. Your city’s Post Office may provide Postal Money Orders.  

Before purchasing your first Money Order (MO), here are some other things you should know:

  • The foolproof way to purchase is with cash. Other possible options would be to use traveler’s checks, a bank debit card or withdraw from a bank account.
  •  The standard cut-off limit is $1000 per MO. If needing an amount greater than $1000, multiple MO’s would be needed. If you need to pay more than $1,000 you first might consider visiting a financial institution for a Cashier’s Check. It is similar to a MO, but with higher securities guaranteed by the paying bank. 
  •  While not free, MO’s are cheap. Typically $1-$2, if not a little pocket change.
  • Valid I.D. may be required at the discretion of the vendor. Take one just in case.
  • Sometimes MO’s have expiration dates, sometimes they do not. Make sure you are aware of the issuer’s policy, especially if you’ve received one as payment. 
  • Scammers exist everywhere. Make sure you are purchasing from a reliable source and that you are careful with any sent to you. If you unexpectedly receive a MO in the mail, or receive one for a higher dollar amount than anticipating, take it to the business of issuance (the company that printed it) for verification of authenticity.

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