Money Orders Basics

Learn when and how to use money orders

Money orders are financial instruments that you can use in place of a cash or check. In order to get a money order, you must prepay the amount to the company issuing the money order. This can be an advantage when a company requires a guarantee of the funds; since you can't get a money order without prepaying, it means you had the funds and the issuing company must honor the money order.

While banks used to view money orders the same as cash, fraud has forced banks to look at money orders like checks. This means that the sender may need to wait for the bank to receive the funds before it will give you the cash. Here are a few money orders basics:

1. Senders do not need a bank account to get a money order.

2. Receivers can cash the money order at any institution that cashes checks.

3. Senders typically need to pay a fee to buy a money order, and receivers might need to pay a fee when cashing money orders, depending on the financial institution.

 

Find out how to implement money orders into your business

Whether you want to use money orders to pay for merchandise or you want to accept money orders in your business, it is a good idea to learn money order basics like how to fill one out and the process for cashing one. When you add in the fees involved, you might find it a better option to use a credit card or some other form of payment.
Try: Find out more about how a money order works at wiseGEEK. See eHow for step-by-step instructions on how to fill out a money order.

Learn to identify authentic money orders

If your business accepts money orders as a form of payment, you need to take steps to ensure that the money order is authentic. Counterfeiters produce copies that even fool banks. Even if the bank gives you the funds, it may require you to repay the funds in full if the money order turns out to be fake. To reduce your risk, work with reputable companies and learn what you can do to prevent scams.
Try: The United States Postal Service provides money orders with built-in security features. Learn more about how to tell if a money order is authentic and find additional information on money orders at its website. MSN Money provides an article on money order scams and offers some advice on how to work with money orders. KOLD offers a report on fake USPS money orders and ways to identify them.

Send money quickly with an electronic money order

An electronic money order is different from a bank money order. Instead of using a piece of paper, the issuing company sends the payment electronically. Usually banks refer to this as a money wire, but online companies use the term electronic money order. The issuing company can send electronic money orders to any of its branches or to a bank via a routing number.
Try: Buy a money order online at Western Union, which provides an online money order option for people who want to send an electronic money order. It also offers information on scams. MoneyGram offers an eMoney option for a domestic or international money order. Find information on its anti-laundering policy, agents' reports and other issues involving money orders on the MoneyGram website.

 

• It is not a good idea to buy money orders online. While online money orders used to be an acceptable way to purchase a money order, the prevalence of scams and fraudulent companies has made this a very risky venture.
• Avoid any request to cash a money order and then wire funds overseas, especially if it is an overpayment for a purchase. There are no legitimate reasons why this would be necessary, but the scam is widespread and continues to defraud people every day.

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