A money order can't bounce the way a traditional check can since it's prepaid, rather than tied to an account that can have too low of a balance for a check to clear. Money order fraud still can be a problem, though. That usually involves forged or stolen money orders, so it's worth verifying any questionable money order you may receive. A money order can be canceled or replaced if it's lost or stolen.
How Money Orders Work
A money order looks and works much like a check, except that it is prepaid when acquired rather than linked to a checking account. You can buy them at U.S. post offices, from some banks, or at grocery and convenience stores through companies such as Western Union and MoneyGram, generally paying the face value of the money order plus a fee. Save any receipts or stubs from the money order in case there is any problem later on.
After purchasing a money order, you can make it out to a particular person or organization and sign it, just as with a check. You should generally address it as soon as possible in case it is lost or stolen. That way, anyone who might find it can make it payable to himself.
When someone receives a money order, she can deposit it in a bank account, just as with a check, generally by taking it to a branch, depositing it in an ATM or scanning it with a mobile deposit app. She also can cash it by taking it to the location that issued it or to a store that offers check cashing. A fee might be charged for that convenience.
Bounce and Fraud Risks
Because money orders are prepaid, they're sometimes considered lower risk than personal checks, which can bounce if there isn't enough money in the linked account. Some vendors will accept only money orders from new customers, or in some circumstances, any customers at all.
Even though they're prepaid, there is still some risk of fraud if someone gives you a counterfeit or stolen money order in exchange for something before you have the chance to verify it's genuine. If you're concerned about a money order, you usually contact the issuer and ask a representative to verify it's real and valid.
Stolen Money Orders
If you lose a money order or have one stolen, you should contact the issuer right away. The issuer should be able to stop payment on it and replace it, though you will often have to pay a fee for this service and the replacement money order might not be available immediately. Often this fee is reduced if you have the original receipt.
If the money order has been deposited, it might be more difficult for you to get your money back, though you can still file a police report.
- Fraud Guides: Counterfeit Money Orders
- NerdWallet: Lost Money Order
- U.S. Postal Service: Domestic Money Orders
- U.S. Postal Service: Verifying U.S. Postal Service Money Orders
- United States Postal Service. "Sending Money Orders." Accessed May 10, 2020.
- MoneyGram. "Send money your way." Accessed May 18, 2020.
- Western Union. "What Are Western Union Agent Locations?" Accessed May 17, 2020.
- U.S. Postal Service Office of Inspector General. "Modernizing the Postal Money Order," Page 5. Accessed May 17, 2020.
- Wells Fargo. "Wells Fargo Consumer and Business Account Fees." Accessed May 10, 2020.
- United States Postal Service. "Postal Facts." Accessed May 10, 2020.
- CVS. "CVS Health At a Glance." Accessed May 10, 2020.
- Walmart. "Money Orders." Accessed May 17, 2020.
- 7-Eleven. "Financial Services." Accessed May 17, 2020.
- Publix. "Customer Service FAQ." Accessed May 17, 2020.
- Kroger Money Services. "Money Orders." Accessed May 17, 2020.
- Kmart. "MoneyHub." Accessed May 17, 2020.
- Western Union. "Western Union and Meijer Ink Deal to Continue Longstanding Relationship." Accessed April 17, 2020.
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.