Here is How to Use Money Orders Safely

Last Update: May 23, 2020 Fraud Make Money

Money orders are by far not the most popular money tool today but they can be very useful in a variety of circumstances.

Whether you need to send a long distance secure payment to reserve a Craigslist sale or provide a relative some emergency cash, money orders are still very useful in a world dominated by credit card payments.

But for the younger generation, both checks and money orders seem like they’re extinct. This article will serve as a good read if you haven’t gotten briefed on how money orders work and how you do them.

How Do Money Orders Work?

Money orders are a fairly easy process.

Many banks, pharmacies, Wal-Mart department stores, grocery stores, gas stations, post offices, and check cashing businesses offer them.

It’s similar to a cashier’s check or a wire transfer; the sender will pay a small transaction fee (usually $1 to $5) to send a check that works like a Western Union redeemable voucher would work. Once the money order gets to ‘point B’ it can be cashed at many different places, including banks, check cashing / payday loan shops, and much more.

Besides Paying, What Else?

The sender will also need to sign the order form and list a reason for the money order. The person buying the money order lists the names of any recipients. The recipient(s) will also need to supply a valid photo ID to be able to cash out the money order.

Money orders are ideal for people that do not have checking accounts and need to transfer $1,000 or less.

We say $1,000 or less because most businesses cap the amount of money that can be transferred to this amount.

Customers that need to send more than this amount will need to send multiple money orders. In this case, you would have to pay a processing fee for each order as well.

Where Can I Redeem a Money Order?

Money orders can be redeemed at the same types of businesses that issue them. If there are multiple money orders to cash, it might be better to go to your local bank as they are more likely to have sufficient funds if you want to cash them out instead of depositing them into a bank account.

Certain businesses only carry so much cash and will not exchange it they cannot honor the full amount of the money order.

If the option is available, it might be less hassle to cash the money order at the same business that issued it.

For example, cashing a money order at a Wal-Mart if it was issued at a Wal-Mart location will make it easier to verify the validity of the money order.

Here is step-by-step process to complete a money order transaction:

  • Step 1: Go to a place that completes money order transactions.
  • Step 2: Start the process by declaring amount to be transferred (i.e. $500) and pay the $500 plus the transaction fee.
  • Step 3: List designated recipient(s) that will be required to show valid photo ID to receive the funds & the purpose for the transaction.
  • Step 4: Sign the money order and include your contact information. Deliver the money order via mail or in-person to the recipient.
  • Step 5: Recipient receives the money order and deposits or “cash in” the money order at a bank or business.

Are Money Orders Safe?

As with any type of payment method, there is always the chance of fraud.

In general, money orders are safe but there are scams to watch out for when receiving a money order.

Scam scenario 1: “the buyer will send more than they were supposed to” which is followed by the buyer asking for the difference to be returned or sent elsewhere.

Scam scenario 2: “the money order turns out to be fake” which would mean the bank is unable to take the funds out, so it will be charged back from your account once this is discovered.

Money orders are safer than sending a traditional check for both the sender and the recipient. Here are some perks that come with using them:

  • They are prepaid, which means no bounced check due to insufficient funds.
  • They do not have personal routing or bank account numbers on the order, while personal checks do, and this information that could lead to identity theft if given to the wrong person.
  • They are more secure than personal checks or cash because only the designated recipient can cash it.
  • If your money order gets lost in the mail, you can cancel it and issue a new one.

If you are making an in-person transaction and it is being paid via money order as the buyer lacks cash but can prepay with a debit card, both the buyer and seller should go together to the issuing place to observe that no potential fraud has occurred.

When Should You Use a Money Order?

The best time to use a money order is to make long-distance payment when regular checks or cash are not accepted. This ordering method is ideal for those that do not have a checking account or credit card who can use a money order to pay bills as most companies do not want cash to be mailed to them in order to pay bills.

If you need to send money internationally, money orders are also a good option because they are secure and internationally recognized.

To send an international money order, an additional fee might be charged to offset international transaction fees. Once again, this is still safer than sending cash to the recipient. As the envelope will pass through many hands, it is hard to say when and what condition it will arrive at the recipient.

When Should You Avoid Using a Money Order?

While money orders serve a purpose, there are times that other payment methods are better.

If money is needed immediately, it is best to perform a wire transfer that will send the fund almost immediately to the bank account of the recipient.

Most banks charge approximately $30 for this convenience, but it boils down to opportunity cost. Wire transfers probably will not work for business transactions like eBay or Craigslist, where anonymity is best, as the buyer needs the routing and account numbers of the recipient to complete the transaction.

What If You Need a Bunch of Money Orders?

If multiple money orders need to be issued due to the transaction limit of $1000, a cashier’s check or certified check is a better option as the fees should be cheaper and can be issued in greater amounts. These types of checks are also prepaid and secure payment methods. Although, the sender needs a bank account to use these options.

Another time to consider upgrading beyond money orders is if money orders will be issued on a routine basis.

The transaction fees will add up over the months or years that could have been spent on other purchases or deposited into a bank account. For a small quantity of money, one can open a checking account and have access to bill pay, a debit card, and the ability to draft cashier’s checks.


Money orders are more common than one might expect. Look at the prevalence of advertising for this financial service. This is a safer and more convenient option for paying bills and making purchases than personal checks, because money orders are more secure and they offer greater privacy.



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