A money order is a method of payment that can be purchased from entities such as banks and post offices, as well as some stores or other businesses. The purchase price is the dollar amount of the money order, as well as an issuing fee that can vary based on the dollar amount or where the order is purchased. Generally, money orders cannot exceed a specified dollar amount. For payments that exceed that amount, multiple money orders must be purchased. Once issued, money orders can be cashed or deposited like any other check.
Money orders can be a safer option than personal checks or cash payments. Unlike personal checks, money orders cannot bounce. This is because they represent an amount of money that has already been paid rather than a bank account that may or may not have the funds available. Further, money orders–such as those from the United States Postal Service–can come with a receipt that can prove their value if the money order is lost, stolen, or damaged. For payments that must be sent through the mail, this offers more security than a cash payment.
There are some possible disadvantages to using money orders, as it can be less convenient than other methods of payment and issuing fees can add up if multiple money orders are required. Further, money orders can be at risk of being used in scams. Some safer options exist, such as cashier’s checks. It is important to note that these potentially safer options are usually accompanied by higher issuing fees.
[Last updated in July of 2020 by the Wex Definitions Team]