How Does a Money Order Work?. A money order is a convenient, widely accepted form of payment. You can use money orders in lieu of cash or checks to make payments in person or through the mail. Regarded as a "safe" payment option, various types of money orders are available through banks, money services businesses and even the post office.
How money orders work, and the pros and cons of this payment option. Whether you’re buying or selling, money orders can be used like checks.
What is a money order? It's simply a little piece of paper that allows the person named to receive a specified amount of cash. Money orders are widely avai
Money orders can offer big advantages in areas such as security, simplicity, and transparency.
Money orders may not be the most innovative or technologically advanced payment method, but they can come in very handy in many situations.
Money orders may seem old school in a world of prepaid debit cards and wire transfers, but they remain a safe, cheap way to pay bills or send someone money.
How do money orders work?they might seem old-fashioned -- like rotary phones and wristwatches. indeed, they've been around since the horse-and-buggy days of the 1860s. but the good old money order can still have a place in your financial toolbox.what is a money order?a paper document that allows you to securely and inexpensively send cash to an individual or vendor.a money order is an alternative payment method to cash and checks when you need to send funds. with a money order, you pay an issuer in the amount you plan to transfer.in return, you receive a paper document similar to a check that includes the dollar amount of your payment. you then mail or deliver the money order to the person or institution you are paying.how to purchase and send a money orderto purchase a money order, you first need to locate an issuer. outlets that sell money orders include:ullstein bild/getty imagesbanks and credit unions.financial services companies such as western union.the u.s. postal service.retailers, including gas stations, convenience stores, grocery stores, drugstores and big-box stores such as wal-mart.payday loan businesses.a money order must include 3 key details that should be familiar to anyone who ever has written a check:the name of the recipient.the amount of money you plan to send.your signature on the front of the money order.in addition, there is a memo line -- just as on a check -- where you can record a note about the nature of the transaction. money orders also come with a receipt. it is crucial to keep the receipt for your own records.you likely will have to pay a small fee for the money order. such fees can range from about 50 cents to several dollars, depending on the issuer.typically, you must pay for a money order with cash, or a debit or credit card. you cannot pay with a check.when the recipient gets the money order, he or she must sign the back and provide proof of identity before receiving the cash. many of the institutions that issue money orders also cash them.why you would use a money ordermoney orders may be a good option in several situations where you need to make a payment, says robert stammers, director of investor education at cfa institute."money orders can be an inexpensive way to occasionally pay bills or transfer money," he says.for example, you may need to use money orders in these cases:you do not have a bank account. money orders work similarly to checks, and make sense for those who do not have a checking option but need to send payment. nearly 12% of households do not have a checking account, according to the most recent fdic national survey of unbanked and underbanked households.in addition, stammers says that some people who do not want to open a bank account can "store" their savings in the form of a money order that can be cashed at any time.the seller demands it. many sellers of goods and services do not take personal checks as a payment method, and may insist on a money order instead.you want extra security. every check has your banking details -- including the bank's routing number and your account number -- at the bottom. this opens opportunities for fraudsters to gain access to the money in your checking account by creating fake checks with your bank information.by contrast, the u.s postal inspection service flatly states that "postal money orders are as secure, if not more so, than any other financial instrument."stammers says money orders have other advantages. for example, they do not require you to have a bank account or online access to make a payment, he says."money orders are prepaid," he says. "unlike personal checks, there is no risk of overdraft."transferring money via money order is often far cheaper than using other payment methods, such as a wire transfer, stammers says. a lost or stolen money order also can be voided and replaced for a stop-payment fee.rate search: thinking about getting a checking account? compare checking account rates and open a bank account today!drawbacks of money ordersmoney orders also come with a few drawbacks.as with checks, they can be intercepted in the mail by thieves and doctored to divert money to another recipient.if your money order is lost and you have misplaced your receipt, you may have a hard time getting the funds back.it is not unusual for money orders to have a ceiling, such as ,000. if you need to send more money than that, you may have to break it up into several money orders -- each of which will come with its own small fee. "using them for a large number of payments could result in a significant total cost," stammers says.money orders also are a common tool of scammers, so it is important to purchase them only from reputable institutions.the future of money orderswhile money orders are still viable for some people, they are likely to become less relevant in coming years, stammers says."the reality is that money orders may be going the way of the horse and buggy," he says.using snail mail to pay bills is cumbersome and slow, he adds. many people prefer to pay bills or transfer money online, and that trend is likely to grow.and instead of using money orders, many people prefer prepaid debit cards as an alternative to carrying cash or having a checking account."even people who have been denied a checking account by a bank can use prepaid debit cards that will allow them to make purchases online and in stores," stammers says.Advertisementrelated links:10 best mother's day gifts to wow millennial momspeople share the best financial advice they got from momthis is why you're successful but singlerelated articles:my no. 1 financial regretmoney tips by age groupwhat consumers paid in 2015.7 things that could offend homebuyers10 celebs who served in the military8 magnates who won't leave wealth to kids11 celebs scammed by bernie madoff7 signs the house flip is a flop.10 worst states for retirementnet worth of 9 political commentatorsnet worth of original 'star wars' actorsnet worth of the clinton, trump kidsget the 411 on va loans.
Wondering where to get a money order? Learn more about how to get a money order as well as sending and receiving them at the Post Office™.
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Not sure how to pay for something with a money order? See an overview of the entire process.