A money order is a printed form of documentation representing payment for a specified amount. Money orders can be cashed or exchanged for physical money at most banks and financial institutions, and even at post offices.
A money order, similar to a written check, is a paper form indicating payment for a predetermined amount of funds. The amount, specified by the person requesting the money order, may be redeemed for cash at banks, qualified financial institutions, and most post offices.
Previously referred to as traveler’s checks, money orders were first issued by American Express in 1882. Now, you can request a money order at almost any financial institution around the world.
How Do Money Orders Work?
The way money orders work is simple. All someone has to do is complete a specific money order form and specify an amount, as well as to whom the money is for. Since they are both written forms meant to represent payment, money orders and personal checks are quite similar.
While a money order functions similarly to a check, there are some differences any potential borrower should be aware of. Money orders usually have a limit of $1,000, which means if you are looking for a larger amount you would have to request multiple money orders. Checks on the other hand, typically do not have a limit, as long as there is enough money in the requestor’s bank account to cover the amount.
Money orders can also come with fees for the person receiving the money. If you do not have a bank account and would like to cash a money order, there are financial institutions that can do so for a fee. If the person sending the money order would like to cover any fees the payee may be responsible for, they would have to add the additional funds to the original money order request. That way, the payee can simply have any fees taken directly out of the money order instead of making a separate payment. But, if you have a bank account and would like to cash a money order, your bank can usually do so for free.
Why Would I Need a Money Order?
Instead of bad credit loans, money orders can be a great convenience when you need money but don’t have a bank account. Just like a check, you can take a money order to most financial institutions to receive the cash you need. You can also take a money order to almost any post office and cash it as well. All of these options allow you to receive the funding from a money order without involving a bank account at all.
Another reason a money order might come in handy is if you are traveling to a different country and want to bring spending money along. Instead of bringing cash from your native country and having it converted at a currency exchange when you travel, you can simply bring along a money order. Money orders may be exchanged for funds in the currency of any country around the world, making them a convenient option for financing while traveling.
What Are the Pros and Cons of a Money Order?
While money orders might seem like a convenient alternative to online installment loans at a glance, they have both pros and cons you should be aware of. Here are some of the advantages and disadvantages that can come with money orders.
A few of the perks you can enjoy with getting a money order are privacy, convenience, and no fees if you have a bank account. Money orders allow you to maintain a certain privacy because they don’t really require any detailed personal information. To cash a money order, you don’t need to give any bank account, social security, or any other financial information.
Money orders also offer convenience given the fact that you can redeem them at most financial institutions and post offices anywhere in the world. If you are traveling, there is no need to convert American dollars into another currency when you have a money order. When you cash a money order, you will receive funds in the currency of the country where you cashed the order.
Another convenience of money orders is that you don’t have to deal with any fees if you deposit a money order into your personal bank account. Like making a cash deposit or depositing a check in your bank account, you can do so without paying any extra hidden fees. Money orders may be a convenient way to work with funds when you’re new to financial planning and looking to become financially independent.
There is also a negative side to money orders you should know about. Since money orders offer so much privacy, they can often be tough to track. So, if you had a money order but lost it, it may be extremely difficult to locate or track the original order. It is also possible for financial scammers to produce fraudulent money orders that authorities might have a hard time tracking down. Also, if you cash a money order at a financial institution other than your bank, there will most likely be extra fees to deal with.
Alternatives to Money Orders
If you want to send or get cash, there are more options available to you besides money orders. Here are other options to consider if you don’t think a money order is a right choice for you.
Personal Check
Instead of getting a money order, you could also opt for a personal check or certified check. Money orders and checks are quite similar, but checks are easier to track since the issuer’s banking information is most likely listed on the check itself. Checks may also offer a bit more financial security since the information of the issuer is displayed directly on the check.
Money Apps
If you want to send money to someone but don’t want to use a money order, you might want to consider using mobile banking/financial applications. Finance apps like PayPal, Venmo, Cash App, Google Pay, Apple Pay, and more allow you to send and receive money directly from your cell phone.
Online Banking
You can also send and receive money straight from your bank’s mobile application. Instead of using a third-party financial app, you can deal with the money directly from your checking and savings accounts via your online bank account or mobile app. While this method requires your financial information, it also saves you the hassle of having to go to a post office, currency exchange, or other financial institution to get your money.
Paying Cash
You can also always rely on cash. If you want to send or receive money without dealing with any banking information or paperwork, there is always the option to use cash. If you are sending someone funding in the form of cash, however, make sure you either give them their money in person or have a safe and secure way of sending the cash. Unfortunately, if cash is lost or stolen it can be difficult to replace it.
Now you know more about money orders and how they work, you can decide if they are the right choice for you and your financial needs!
Resources