Learn How Money Orders Work and Track Yours

What Is a Money Order and How Does It Work

A money order is a piece of paper that works like a check but functions differently. Instead of drawing money from your personal bank account, you prepay the full amount at the time you purchase the money order. This means the money is already collected before the money order is issued, which makes it safer than a personal check for both the sender and the receiver.

You can purchase money orders from many locations, including banks, credit unions, grocery stores, convenience stores, and post offices. The U.S. Postal Service (USPS) is one of the largest money order providers in the country. Western Union and MoneyGram are two other major companies that issue money orders. When you buy a money order, you pay the amount you want to send plus a small fee, which typically ranges from 70 cents to $2.50 depending on where you purchase it and the amount being sent.

Money orders have several fields you need to fill out. The "Payee" line is where you write the name of the person or business that will receive the money. The "Amount" section shows how much money the order is worth. You sign the money order in the designated space. Many money orders also have a memo line where you can write a brief note about what the money is for, such as "Rent Payment" or "Invoice #12345."

The person who receives the money order (called the payee) can cash it at most banks, credit unions, or check-cashing services. Some retail stores like Walmart and Target also cash money orders. The payee brings the money order to one of these locations and receives cash or deposits it into their bank account. There is typically no fee for cashing a money order on the receiving end.

Money orders are commonly used for several reasons. They provide a paper trail of the transaction, which is useful for record-keeping. They are more secure than sending cash through the mail. They work even if you don't have a bank account. Landlords often accept money orders as payment. Businesses use them for large purchases or when they don't want to accept personal checks.

Practical Takeaway: Money orders function as prepaid alternatives to checks, with the funds collected upfront before the order is issued. You can purchase them at numerous retail locations, and fees are generally small. The recipient can cash them at banks, credit unions, or other check-cashing locations.

Where to Purchase Money Orders

You have many options for where to buy a money order. The most convenient location for many people is their local bank or credit union. Banks typically offer money orders to their customers and sometimes to non-customers as well. Purchasing a money order at your bank may be simpler if you already have an account there, as the teller knows you and the process moves quickly. Many banks offer money orders in amounts up to $1,000, though some allow higher amounts.

The U.S. Postal Service sells money orders at all post office locations. USPS money orders can be purchased in amounts from $1 to $1,000. The fee for a USPS money order is typically $1.45 for amounts up to $500 and $1.95 for amounts from $500.01 to $1,000. Post offices are widely available across the country, with over 31,000 locations, making USPS a convenient option for many people.

Retail stores with financial services counters are another common source. Walmart has money order services at most of its locations. Target also offers money orders at many stores. The fees at these retailers are often competitive, sometimes lower than banks or post offices. Walmart's money order fee is typically around 88 cents for orders up to $1,000. These stores are often open longer hours than traditional banks, providing more flexibility for when you can purchase a money order.

Convenience stores and grocery stores frequently offer money orders as well. Many 7-Eleven locations sell money orders, as do various local grocery chains. Western Union and MoneyGram have locations in many convenience stores and grocery stores. Fees at these locations vary but are often similar to other retail options, typically between 70 cents and $2.

Online options for money orders are limited but growing. Some banks allow you to order money orders online and pick them up at a branch, though you still need to pay in advance. A few services offer digital money orders that can be delivered electronically. However, traditional in-person purchase remains the most common method.

Practical Takeaway: You can purchase money orders at banks, credit unions, post offices, major retailers like Walmart and Target, convenience stores, and some grocery stores. Compare fees among these options since they can vary, and consider which location offers the most convenience based on your schedule and location.

Understanding Fees and Costs

Money order fees are an important part of understanding the true cost of sending money this way. Unlike a regular check, which has no fee to write, each money order purchase includes a charge that you pay upfront. This fee varies based on where you purchase the money order and the amount being sent.

At the U.S. Postal Service, fees are tiered by amount. For money orders up to $500, the fee is $1.45. For amounts between $500.01 and $1,000, the fee is $1.95. These rates have remained relatively stable in recent years. If you need to send more than $1,000, you would need to purchase multiple money orders, which would mean paying multiple fees.

Walmart typically charges around 88 cents for money orders up to $1,000, which is lower than the post office fee. Target's fees are similar, usually in the 75-cent to $1.50 range depending on the amount. These lower fees make retail stores an economical choice if one is convenient for you.

Banks and credit unions have varying fee structures. Some charge $5 to $10 per money order, while others charge less if you are a customer. Community banks and credit unions sometimes offer money orders at no charge to their members. It is worth asking your bank what they charge before assuming a specific cost.

When calculating the total cost of sending money via money order, you need to add the fee to the amount you are sending. If you are sending $500 via USPS, the total cost to you is $501.45. If you are sending $500 via Walmart, the total cost is $500.88. Over time, if you regularly send money orders, these fees can add up. For example, someone who sends ten $500 money orders per year through USPS would pay $14.50 in fees, while the same person using Walmart would pay $8.80.

Some places offer discounts on money orders if you purchase multiple orders at once, though this is less common than it used to be. It is also worth noting that fees do not include any charges that the receiving end might incur if they are cashing the money order at a location that charges a fee, though most places do not charge recipients to cash money orders.

Practical Takeaway: Money order fees typically range from 70 cents to $2, with retail stores like Walmart offering lower fees than post offices. Calculate the total cost by adding the fee to the amount you are sending. Compare fee structures among nearby locations to minimize your expenses, particularly if you send money orders regularly.

How to Fill Out a Money Order Correctly

Filling out a money order correctly is essential because errors can delay payment or cause the money order to be rejected. The process is straightforward, but attention to detail matters. Most money orders have the same basic fields, though the exact layout may vary slightly depending on where you purchase it.

Start with the "Pay to the Order of" or "Payee" line. Write the name of the person or organization that will receive the money. Use clear, legible writing and spell the name correctly. If you are paying a business, write the business name as it appears on invoices or official documents. Write only the name on this line, not an address or other information. Do not leave this line blank or write "Cash," as this makes the money order unsafe and harder to track.

Next, fill in the dollar amount in two places. One space is typically a box where you write the amount in numbers, such as "$250.00." Write this clearly and include cents, even if the amount is a whole dollar figure. Another space asks you to write the amount in words, such as "Two Hundred Fifty Dollars." Write out the full amount, starting from