When you make a purchase, either online or in person, you may pay for it with cash, with a personal check, or with a credit or debit card. However, bank money orders, which are prepaid checks you purchase from a bank, are a more secure way to pay for purchases.
A bank money order is a type of payment issued by a banking institution for a pre-determined amount. When you purchase a bank money order, you pay in advance the funds backing the payment. Because you prepay the funds, bank money orders are more secure than personal checks for making payments. Cashier's checks or teller's checks are other terms for bank money orders.
Information Displayed on a Bank Money Order
When you purchase a bank money order, the bank will print the payment amount on a piece of paper that looks very similar to a personal check, but usually with the bank's logo and contact information displayed on the front. The money order typically has blank spaces for you to write in your contact information such as your name and address. It also has space for you to write in the name and address of the person you intend to receive the money order. Some banks will print your contact information and the recipient's information for you, depending on the bank's individual policies. Banks typically take other security measures on printed money orders, such as unique watermarks and special tracking codes that allow purchasers and banks to track whether the recipient cashed the money order.
How to Purchase
You can purchase a money order from a bank in one of two ways. If you purchase the money order at a bank at which you have a pre-existing account, the bank can withdraw the funds directly from your account to fund the money order. You can also purchase a money order with cash or a credit card from any bank, even if you don't have an account at that bank. However, some banks will only sell money orders to account holders at that bank. You can complete both of these transactions at any physical bank location by walking in and requesting a money order purchase from a bank teller.
How to Use
You may use a money order to pay for purchases in the same way that you would use a personal check. Most money orders have a detachable stub with a tracking number. Should the money order be lost or stolen, the bank can trace where it paid on or deposited using the tracking number. When you send a money order as a payment for goods or services, keep the stub as a way to track it for security purposes. You may also cash a bank money order in the same way you would cash a check. You may exchange it for cash at any branch of the issuing bank, or deposit it into your own checking account and wait for its funds to clear. Funds from a deposited bank money order may take up to ten calendar days to clear.
Fees and Limitations
Most banks charge you a fee to purchase a money order. This fee is usually under ten dollars, but may vary depending on the amount of the money order and the individual bank. Some banks waive the fee if you have an account with the bank, or if you're funding the money order with funds from your account at the bank. Some banks may limit the amount for which you can purchase a money order. Banks typically limit the maximum amount for which they will issue a bank money order. If you need a money order in a denomination that is greater than the maximum amount, you must purchase several money orders from the bank to total the amount you need.
- BankersOnline.com; Stop Payments on Bank-Issued Money Orders; John Burnett; April 4, 2005
- The Consumerist; Bank of America Has High Money Order Fees, Teller Recommends You Go Elsewhere; Phil Villarreal; Sept. 18, 2009
- National Check Fraud Association: Other Check Problems: Lost, Stolen, or Destroyed Cashiers Checks, Teller and Certified Checks