What is a money order, and how do they compare to other cash payments?

A money order is a secure way to send money or make a payment — up to $1,000. Many recipients prefer money orders because, unlike a personal check, a money order can’t “bounce” and clears almost immediately; therefore, they provide a fast, risk-free form of payment.

Money orders are secure because they’re issued by third-party distributors, in direct exchange for the cash value of the money order, plus a small fee — usually less than $15. And money orders can only be claimed by the person or business they’re addressed to.

Money orders can also be sent internationally and can be used to settle debts larger than $1,000 (by sending multiple money orders). In some instances, you don’t need a bank account to send one.

First, decide how much money you want to send and where the funds will come from (cash, debit or credit card). Next, you'll need to go somewhere that issues them. Generally, any financial institution, such as a bank or credit union, will have money orders, or you can go to a U.S. post office. Many supermarkets and convenience stores offer money orders at their customer service desks as well.

Once you're ready to fill out the money order, these are the steps:

1. Enter the recipient's name and address

List the name and address of the person or business you're sending money to. Only the listed recipient will be able to cash the money order. If you leave this field blank, anyone could put the money order in their name and take the payment.

2. Enter your name and address

The money order will have a spot for your name and address as the purchaser. Fill this out accurately in case the money order needs to be returned to you.

3. Add notes to the memo field

In the memo field at the bottom of the money order, describe what the payment is for. You may want to indicate that you're purchasing a specific item or giving someone a loan. The memo field is also a good place to put account or order numbers that the receiving party may need to reference.

4. Sign the front of the money order

To complete the money order, you must sign it. As the payer, you sign the front of the money order. The person receiving the money will sign the back to cash it.

5. Keep the receipt for tracking

You'll get a receipt for the money order that has a tracking number. If the recipient doesn't get the money, you can use the tracking number to try to find out what happened. If the money order is lost or stolen, you'll need the tracking number to replace it.

A money order usually costs up to $5 depending on where you buy it and the size of your transaction. For example, the post office charges $2 for money orders up to $500 and $2.90 for money orders between $500 to $1,000. Money order companies may also charge a fee to replace a lost or stolen money order.

It may cost less to fund a money order with cash or a debit from your bank account. While you can use a credit card, buying a money order often counts as a cash advance, and the credit card company may charge a fee. For example, say Casey is sending a $400 money order via the post office, where it costs $2. If they pay with cash or debit card, the total for the money order would be $402. But if they use a credit card that charges a 5% cash advance fee, they'll end up paying a total of $422, with $20 going to the credit card company.

Advantages

• Guaranteed payment. Since you pay for a money order in advance, the other party knows the funds are good. There's no risk the money order will try to draw from an insufficient account, like a bounced check.
• Safer than sending cash. Anyone can take and use cash. Only the person or business named can redeem the money order.
• Available without a bank account. You can fund a money order with cash or a prepaid cash card.
• Less expensive than other options. While money orders have a processing fee, it's usually less than the cost of other guaranteed payments, such as a cashier's check or wire transfer.
• Usable for international transfers. You can use money orders to send funds either in the U.S. or abroad.

Drawbacks

• Limits how much can go on one transaction. Money orders typically have a maximum transaction limit of $1,000. If you want to send more than that, you'll have to pay for multiple money orders.
• Must be requested in person. You have to fill out the money order and pay for it in person at specific locations. You can't complete a money order online.
• Takes more time than electronic transfers. The recipient must cash the money order somewhere that will accept them or deposit it in their bank account. Both are manual tasks that add processing time.
• Difficult to reverse after it's cashed. If you make out a money order to the wrong recipient, whether by accident or because you later realize you've been scammed, it's generally impossible to recover the money after they cash it. Don't send a money order unless you're sure about who's receiving it.

Money orders aren't the only way to send money to people and businesses. Here are other common payment methods and how they stack up against money orders:

Personal checks

Although personal checks are quicker and cheaper for the sender to use, they're not guaranteed for the recipient. If there's not enough money in the sender's checking account, the check usually won't be cashable. Most people and businesses prefer a secure payment method, especially for larger sums of money.

Cashier's check

While cashier's checks are also a secure payment method, they can be more expensive than a money order. Fees are often around $10 to $15. However, they do have higher maximum amounts. So if you need to send thousands of dollars, it might ultimately be cheaper to send one cashier's check rather than several money orders.

Wire transfer

Domestic wire transfers are also more expensive than money orders, but they can let you send a lot of money quickly. They tend to cost around $25 if transferring within the U.S., with international fees closer to $40. Another downside is that recipients also usually have to pay a receiving fee.

Zelle®

Zelle® is offered by financial institutions that lets you send and receive money, typically in minutes¹. Transaction limits vary depending on your bank, so check yours before using this method.

Money orders offer a way to send guaranteed payments to others for a small fee. They're handy if you don't have a bank account and don't have access to other convenient payment methods, like Zelle®, the Citizens mobile app* and personal checks. Money orders are also a low-cost but secure alternative to wire transfers and cashier's checks as long as you're OK with the limit of up to $1,000 per transaction.

Want to send a money order? Visit a Citizens branch near you.