How do money orders work ? Explanation

What Exactly Is a Money Order?

A money order is a certificate that allows the stated payee to receive cash on demand, usually issued by a government or banking institution. A money order is similar to a check-in in that the person who purchased it has the ability to stop payment.

Money Order

Money orders are easily accepted and converted to cash, and they are frequently used by people who do not have access to a traditional checking account. These tools are an acceptable form of payment for small debts, both business and personal, and can be purchased for a small service fee from most organizations.

American Express first issued money orders in 1882, and they later became known as traveler's checks.

Money Orders' advantages and disadvantages

In some cases, paying with a money order is preferable to paying with a personal check. Because the account holder's routing number and bank account number are printed on the bottom of personal checks, this private information can be stolen and used to create and sign fraudulent checks. Money orders, on the other hand, do not include any personal information about the buyer.

Money orders, on the other hand, can be more difficult to track than personal checks. Check writers can find out whether a personal check has cleared by visiting their bank or checking their online account.

To learn whether a money order has been cashed, the issuer must fill out tracking forms and pay an additional fee. The entire process of determining the status of a money order can take several weeks. The USPS provides an online money order inquiry service where buyers can enter their money order number and receive an update on its status.

Other financial instruments that can be used to send guaranteed funds to an individual or business, in addition to checks and money orders, include traveler's checks, wire transfers, bank drafts, and cashier's checks.


  • Personal information such as your bank's routing number and account number are not included in money orders.
  • The recipient can cash the order at any local bank or credit union; there is no need for the recipient to go to the issuer.
  • Money orders can also be deposited into a bank account for no additional charge.
  • Money orders can be issued in one country and cashed in another.


  • Money orders can be more difficult to track than personal checks; for example, determining whether a money order has been cashed can require forms and take weeks.
  • There may be a fee for cashing the money order.
  • If the funds are cashed at a bank other than the issuer, there may be a delay in receiving them.
  • Money orders can be fraudulent; be cautious when receiving them from strangers, and don't spend money orders you deposit in the bank until you know the bank was able to cash them.

Particular Considerations

The person who receives a money order is not required to visit the same issuer who sold the money order. The recipient can cash it at a local bank or credit union, but the funds may not be received all at once, depending on the institution's policy. 
money orders work

If the payee does not have an account, cashing the money order at the issuer's office is an excellent choice.

A payee, on the other hand, is not required to cash the money order right away. They can deposit it into a bank account just like a check. For payees who are concerned about the fees charged to cash certificates at multiple locations, depositing money orders is a good option.

Because the fees are certain to reduce the amount of money received, depositing it at a bank with no additional charges ensures that the account holder keeps all of the money paid to them.

A money order, as is often the case, can be used to send money outside of the country. A money order issued in one country can be cashed in another by an issuer with multiple branches in different countries. International money orders are thus a cheap and quick way to send money across borders.

Money Orders and How They Work

When purchasing a money order, the purchaser must fill out a form with the recipient's name and the amount that the recipient should receive. Most money orders have a $1,000 maximum limit. As a result, if a buyer requires more than the specified limit, he must place multiple orders.

 Make sure to carefully fill out the money order; it's a one-time purchase that must be documented.

The financial institution or authorized body that issues the money order to the payer will know who the payee is, who the issuer is, and how much money can be cashed. 

The fees charged to the payee are not included in this dollar amount. When purchasing money orders, consider all costs. Money orders are typically more expensive to issue at a bank or credit union than at a convenience store.

Note: A money order is not a check, and it is more difficult to trace; keep your receipt until you are certain the order was received and cashed.
When a buyer pays for a money order, he or she receives a receipt that includes the money order's serial number. This information should be kept until the purchaser is confident that the money order has cleared. Without a receiving, tracing a money order can be difficult or even impossible.

How to Purchase a Money Order

A money order can be purchased at any bank or credit union, as well as most grocery stores, convenience stores, and any store that offers check-to-cash or money transfer services such as MoneyGram or Western Union. Money orders are also available from the United States Postal Service.

To order, simply bring enough money to cover the cost of the money order, either in cash or with a debit card. For transactions exceeding $3,000, you may be required to present your ID and complete a special form. This data is used to combat money laundering.

How Much Are Money Orders?

Although there is an additional fee for issuing a money order, it is typically a small fraction of the order's value. The USPS, for example, charges $1.65 for money orders up to $500 and $2.20 for orders up to $1,000. Money orders issued in military postal facilities have lower fees.

Money orders from commercial institutions may be priced differently, but the fees will be similar. International money orders, on the other hand, may incur higher fees.

Cashier's Checks vs. Money Orders

A cashier's check is similar to a money order in that both are used for payment when cash or a personal check would be impractical. Neither can be purchased on credit; they must be purchased in cash.

A cashier's check, on the other hand, is simply a check written by a financial institution against its own assets, as opposed to a money order. Because there is no chance of the check bouncing, this is considered more reliable than a personal check.

As a result, cashier's checks are frequently used to make large purchases, such as a home or car. Whereas a personal check for that amount may be held by a bank, funds issued by a cashier's check should be available the following business day.

Money orders, on the other hand, are typically used for smaller transfers, such as rent or mortgage payments. Many institutions, including the US Postal Service, have a $1,000 limit on money orders.

Money Order Alternatives

Money Order Alternatives

Money orders are commonly used for payment when the payee is not set up for cash receipts. Personal checks, debit cards, credit cards, and even online payment apps may be accepted in some cases.

Money orders, on the other hand, differ slightly from these alternatives. Unlike card or electronic payments, a money order recipient does not require any special technology to receive a money order. Furthermore, unlike checks, money orders do not bounce.

How Do You Make a Money Order?

When purchasing a money order, you must include information about both the purchaser (you) and the recipient. Fill in the "Pay to the Order" field with the intended recipient's name, and your full legal name and address in the appropriate fields. 

Some money orders do not require your address. Finally, sign, date, and keep the money order receipt.

Where Do I Go to Cash a Money Order?

Cash a Money Order

A money order can be cashed in the same places that it is issued, such as a bank, credit union, Post Office, check-cashing store, or even some convenience and grocery stores. A small fee for cashing the money order may apply, which you can avoid by depositing the money order into a bank account.

How Long Does a Money Order Last?

Money orders do not expire, but if you cash them more than a year after they were issued, you may be charged additional service fees. 

These conditions will be listed on the back of your money order. Domestic money orders from the United States Postal Service, on the other hand, never expire or lose value.

In conclusion

A money order enables the recipient to receive a cash payment from a bank or other financial institution right away. 

As a result, money orders are a popular way to make medium-sized payments when cash or personal checks are impractical. Money orders, unlike cash, can be replaced and cannot bounce due to insufficient funds.

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Mira Sandra
Mira Sandra I am Mira Sandra. A blogger, YouTuber, trader, and owner of the blog Starting to know online business since 2014 and continue to learn about internet business until now. Currently active as a trader and content writer at

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