If you need to make a payment, but don’t want to use cash or a personal check, you’re not alone. Sometimes sending cash or checks just doesn’t feel secure enough. So what are your options? Nowadays, electronic payments are becoming more widely accepted. But sometimes a seller may ask for a money order instead. What is a money order exactly?
What Is a Money Order?
Put simply, a money order is a printed certificate of payment for a specified sum. It’s basically a piece of paper that the stated recipient can turn into cash. You can easily get a money order from a bank, financial institution, supermarket or post office. You simply pay the amount upfront, and you receive the order. This means that you can make a payment even without a checking account.
Money orders can only be issued after a buyer pays for them, providing a guarantee of payment by a third party. You can use a money order to pay for a variety of costs from paying bills to making a simple purchase. You just have to know the exact amount of the purchase to put on the money order. Often, sellers or organizations don’t want to take on the risks of accepting a personal check so they require payment in the form of a money order.
How to Get a Money Order
It’s pretty easy to get a money order. Find an institution that distributes them, like a bank or post office, and pay the full amount upfront. Money orders often come with a small fee, paid to the distributor. Supermarkets tend to charge the smallest fees, while banks can charge up to about $10 for a money order. Some places may charge a percentage of the order amount. It’s best to call or look online ahead of purchasing a money order.
When you purchase the money order, you will have to fill in the name and contact information of the payee as well as your own name and information. A memo line allows you to detail where the money order will go or to write any relevant reference number.
Next, you sign the front of the money order. Now you can send it to whomever you’re paying. Be sure to keep the receipt until the money order is cleared. That way you can track it and have proof of payment on file. To maintain security, a money order recipient may need to show proof of identification to cash it. That’s why you put the recipient’s name on the money order, so no one else can cash your intended money.
Pros and Cons of Money Orders
Let’s start with the benefits of money orders. For starters, they provide a more guaranteed form of payment. They’re prepaid, so you won’t have to worry about it being an empty payment. Instead of asking for a personal check payment, which could bounce after you accept it, you can ask for a money order which you know has already been paid for. Plus, money orders include less personal information than a personal check, which has your name, home address and bank account numbers. That sensitive information can be used to create fraudulent checks.
Plus, you have to specify an amount and a recipient on the money order. This makes them similar to cash payments, but much safer and more direct. You can also track, cancel and re-issue a money order should one get lost.
However, money orders do have limitations. For one, you can usually only get a money order for amounts of $1,000 or less. So if you wanted to send money orders larger than that, you would have to buy more than one money order and pay the fee each time. Additionally, you’ll need to make sure your recipient will even accept a money order. Sometimes people or institutions won’t accept money orders for the extra work they can require.
Lastly, while money orders are generally considered safe, they’re still able to be copied by fraudsters. If you’re the one sending a money order, you only really need to worry about it getting lost or stolen. If you’re receiving a money order, though, be wary of them especially if you do not know or trust the sender. Look for easy red flags like typos or wrong numbers.
Should I Use a Money Order?
Whether you need to use a money order will depend on your situation. Sometimes you need to make a payment where the seller requires a money order. It’s a good thing that you can find money orders at easily reachable vendors like the post office or a bank. And while they come with fees, they don’t tend to run very high. This means that you can use a money order for its security even if you’re not made of money.
You can also use a money order when you don’t have a checking account. Without a checking account, you can’t make electronic transfers or withdraw cash. Money orders allow you to make payments anyway. Plus, they rid you of the worry that a personal check might bounce.
Lastly, money orders can be perfect for international payments. They’re more secure than wire payments, although they make take a little longer to send. Money orders can also be more easily exchanged to local currency and don’t require a foreign transaction fee.
Money Order Alternatives
If you’re not comfortable with a money order, you do have other options. Instead of a money order, cash or personal checks, you can get and send a cashier’s check. You can get a cashier’s check from any financial institution, although it might just be easier to go to one where you have an account. To get a cashier’s check, the financial institution pulls the amount from your account and places it in its own account. Then when the recipient cashes the check, the funds are guaranteed to be drawn from the bank’s account.
Similar to a cashier’s check, you can get a certified check. Again, you can go to any financial institution to get one. Here, instead of paying the bank, the bank freezes the check amount in your account. Then when the recipient goes to cash or deposit the check, there will be at least the check amount in your account. This is also a form of guaranteed payment.
Of course, you can still go with electronic payments and wire transfers. However, those aren’t always accepted and pose their own risks.
Almost anytime you need to mail a payment, money orders make the process more secure. As the sender, you’re guaranteed that your payment will go through safely. If it doesn’t, you can still stop the payment. As the recipient, you know the payment has already been made, and all you need to do is cash it in. If you need an alternative to cash and a personal check, a money order may just be your safest bet.
Photo credit: ©iStock.com/Kameleon007, ©iStock.com/Alina555, ©iStock.com/Ababsolutum