A money order is a paper document used for making payments in the same way as a check.
The major difference from a check is that it is pre-paid for the amount shown on it. One can buy a money order usually with cash.
It is, therefore, more trusted than a check which has to clear the bank first before funds can be used. A genuine money order cannot bounce as it is guaranteed by the Post Office or whatever issuing institution.
To learn more about checks go to the following posts.
How Does A Money Order Work?
In order to use a money order you first of all have to buy it.
Money orders can be bought with cash or a debit or credit card at banks, credit unions and the US Post Office and some shops such as Walmart.
For example, if you want to pay someone $50 then you will buy a money order for that amount.
Most money orders usually have a limit of $1,000. Therefore if you want to pay more than this you may have to buy more money orders.
One thing that you need to take into account when buying money orders are the fees.
They range from $1 to $2 at most places to $5-$10 at some banks and credit unions. The US Postal Services usually charges $1.70 per money order.
After buying you need to fill the name of the recipient and his or her address. Afterward, you will sign at the bottom of the money.
Some money orders will also have a line titled, “memo” where you can provide additional details about the payments.
Once all this is done, it is now time to make the payment. You can either post it or give it to the person you want to pay directly.
How do you cash in a money order?
In order to cash your money order, you need to do the following.
- Go to a location that cashes money orders such as banks, credit unions, some retail shops like Walmart, and convenience stores, etc.
- You will then be required to endorse your money order.
- The teller or cashier will verify your identity to see if it matches what is on the money order.
- Some places may require you to pay service fees.
- Then you will get your cash.
What do you need for a money order?
You may need to use money orders for the following reasons.
- Some individuals or sellers require payment in money orders. There are institutions that sometimes want the payment to be done in money orders. They, therefore, don’t have to worry about the payment bouncing.
- It is more secure than sending cash. For example, if you want to send pocket money to your son in college and for some reason, you don’t want to use a check you can send money orders instead. There are more secure than sending cash through the mail.
- It is more secure than carrying around huge amounts of cash. There is a reason why drug lords like cash. It is difficult to trace.