What Are Money Orders and How Do They Work?

In this modern era of digital payments, the idea of money orders may sound too old-fashioned. Since all it takes is to use an app to directly transfer your payments or use your debit or credit card, why will you even bother with money orders, right?

While they are no longer the trend for payments, money order still cater to one important need that can never be duplicated by other modes of payment despite all the advancements in financial technology.

What are Money Orders?

Money orders are a paper means of payment just like a check. But, what makes money orders different from personal checks is the fact that they come with guaranteed payment. Money orders can’t bounce unlike checks. This is because you buy a money order using cash or any guaranteed mode of payment like a debit card or a traveler’s check. You cannot use a credit card or a personal check to buy a money order.

When buying a money order, you also need to give the name of the recipient or the payee. The name of the issuing financial institution must also be printed on the money order. The presence of these two things on every money order makes it hard for anyone to cash a payee aside from the payee that makes money orders a safer choice than cash and possibly safer compared to other digital types of payment.

There is a very little chance for your money to end up in the hands o a thief even when your money order is misdirected or stolen. But, you still need to keep the receipt for you to recover and track funds in the event that your money order gets stolen or lost.

However, money orders also have some limits. For instance, you are not allowed to buy a money order for over $1,000 at the USPS or United States Postal Service. You are also required to fill up a special form and present a photo ID issued by the government if you buy money orders worth over $3,500 in one day.

How to Buy Them?

You can buy money orders from any establishment or institution selling them such as:

• The USPS
• Several retail banks such as Wells Fargo
• Several retailers such as convenience stores, big-box retailers, grocery stores, and pharmacies
• Payday loan check-cashing stores

All money order’s have a nominal fee that can cost less than a dollar at certain retailers.  To buy money orders, be ready with a means of paying for the fee and the money order’s face value. If you will buy a money order from the bank, you can typically pay for the fee and face value with your savings or checking account.

When buying a money order, verify first if the amount is correct. Fill in your contact details and name and the information of the recipient. There is a memo line in money orders where you can indicate their purpose but this is not really required. Another line is for your signature that might be required except when buying a USPS money order.

The issuer will give you a receipt that offers payment proof in case the money order is lost. There are also cases where it lets you track when your money order gets to the payee.