Table of Contents

Understanding Money Orders

What Is a Money Order?

A money order is a certificate, usually issued by a government or banking institution, that allows the stated payee to receive cash on demand. A money order may stop payment, much like a check.
Money orders can be easily turned into cash and are often used by people who don’t have a standard checking account. They’re a good way to pay for small personal or business debts, and you can buy them for a small service fee from most places.
American Express first issued money orders in 1882, and they later became popular as traveler’s checks.


How Money Orders Work

Most money orders have a maximum limit of $1,000 and the person who buys it will have to fill out the name of the recipient on a form along with the amount the recipient should receive. If a buyer needs more than the stipulated limit, he would need to purchase multiple orders. Be sure to fill out the money order carefully, because it’s a one-off purchase. Good records are important to keep.
The payee’s name, the issuer’s name, and the amount of money that can be cashed will be on the money order issued to the payer by the financial institution or authorized body. This dollar value does not include the fees charged to the payee. When purchasing money orders, factor in all costs. A bank or credit union will normally charge more than a convenience store to issue money orders.


The receipt for a money order includes the serial number of the money order and this information should always be kept until the purchaser is certain the money order has cleared. Tracing a money order can be difficult or even impossible without a receipt.


Advantages vs. Disadvantages

Paying with a money order can be safer than paying with a personal check in some situations, since personal checks include the account holder’s routing number and bank account number printed on the bottom. This private information can be stolen and used to create and sign fraudulent checks. Money orders do not include personal information about the purchaser, in contrast.



  • Money orders do not include personal information, such as your bank’s routing number and your bank account number.
  • The recipient can cash the order at a local bank or credit union—there’s no requirement to go to the issuer to have it cashed.
  • Money orders can also be deposited into a bank account, for no fee.
  • The money order can be issued in one country and be cashed in another country.


  • Money orders can be more difficult to track than a personal check—to find out whether the money order has been cashed, for example, can require forms and take weeks.
  • Cashing the money order can incur a fee.
  • There may be a delay in getting the funds if they are cashed at a bank other than the issuer.
  • Money orders can be fraudulent; be wary about receiving them from people you don’t know and don’t spend money orders you deposit in the bank until you know the bank was able to cash them.

Although personal checks are more difficult to track than money orders, check writers can visit their bank or look at their online account to determine whether a check has cleared.
It can take weeks to track a money order by filling out tracking forms and paying an additional fee to the issuer. You can inquire about the status of your money order by inputting the money order number on the USPS online inquiry service.
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.


Special Considerations

The recipient of a money order does not have to go to the same issuer that sold the money order. The recipient can have it cashed at a local bank or credit union, but may not receive the full amount of the money order all at once, depending on the institution’s policy. Cashing the money order at the issuer’s office is a great option if the payee has no account.
A payee does not have to cash the money order right away, but can deposit it into a bank account as they would do a check. For payees who are concerned about the fees charged to cash the certificates at multiple locations, depositing money orders is a good option.
Depositing money at a bank with no additional charges will ensure that the account holder keeps all the money paid to them, since the fees are certain to reduce the amount of money that will be received.
A money order can often be used as a vehicle to send money outside the country. An issuer with multiple branches in different countries can issue a money order in one country that can be cashed in another country. Cheap and quick, international money orders are a great way to send money to another country.

Related Articles

Scroll to Top