Money Orders: What You Need To Know
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It may seem like a novelty in the era of Bitcoin and Interac e-transfers, but the value of money orders transcends technological advancement. This paper payment method, like all other types of transfer methods, deals with regular currency. Though it can seem easier to handle matters online, there are a surprising number of benefits to this payment approach. There’s a time and a place for everything, and money orders are no exception. In fact, in certain transactions, it offers an unrivalled level of security. To determine whether it is situationally appropriate to use a money order, it helps to understand how they work.
What is a Money Order?
First, let’s discuss what a money order actually is. Similar to a paper cheque, a money order is a tactile payment form. Like cheques, they are addressed to a specific payee. The paper document represents a fixed amount of currency, just like a cheque, with some noteworthy differences. Among the most significant differences between the two is that a money order has guaranteed funds. It is unable to bounce or result in insufficient funds fees. The money order itself becomes the cash value you chose to apply upon purchase.
How Does a Money Order Work?
When you attend your financial institution in person, you request a money order from the teller. They will gather relevant information and make the transfer, providing you with a paper money order that you can use for whatever purpose you need. You must pay the full amount of the money order at the time of purchase, along with the payee’s name.
How do You Purchase a Money Order as The Sender?
If you are the party sending the money, it is quite straightforward to access the paper money order. Plan a trip to your financial institution (bank or Credit Union) and follow these simple steps:
- Prepare your documents: The key to any successful bank dealing is to plan ahead. Make sure you have all the money you will need to pay the full amount. While cash, debit, and credit cards are viable payment methods, credit cards come with an extra fee. Arrive at the bank with identification and your banking credentials. Ensure that you have the correct name and spelling of the recipient.
- Complete the form: When you go to access your money order, you will need to fill out a simple form. You must supply your personal information, including your name and address. A signature is required to make the transaction binding. Take your time when completing the form and be sure to check your work thoroughly. Once the details are in place, you cannot change them.
- Hold on to your receipt: Keeping complete records is always prudent, but it is particularly important when it comes to financial transactions. Your receipt will be an exact copy of the money order itself. This gives you a record of the order you signed and serves as proof that you created the money order.
- Track it until the money arrives: On the receipt, you will see a tracking number that informs you when the money reaches its destination. This serves as verification of payment; since, in conjunction with the receipt, it proves that you paid the funds and the recipient cashed the money order.
Need to send money overseas? Check out the best international money transfer companies.
How do You Cash a Money Order as The Recipient?
Whether as a rent payment, cash for selling your car, or something else entirely, you could find yourself the recipient of a money order. While it is, technically, worth the cash value noted on the paper, it won’t do you any good unless you cash it.
Ideally, you will be able to go to the branch where it was generated. If you are unable to access that location, the next best thing is to go to a different branch of the same business. For instance, if it was issued at an RBC bank in Toronto, but you are in Ottawa, find the RBC branch nearest to you.
There are other places that both issue and receive money orders, specifically post offices, check-cashing spots, and credit unions. Depending on the practices and procedures of each spot, you might incur a fee. Since the money order has direct cash value, you can either deposit the amount into your bank account or take it out in cash.
Find out if a wire transfer is a better option for you.
Where Can You Get a Money Order?
Depending on where you make your money order, you will have to pay a different amount. If the money is being sent within Canada, it won’t cost much more than $5. However, if you are planning an international money order, it will come with a heftier price tag. Though major financial institutions offer money orders internationally, not all places do. Among the Canadian spots you can approach for a money order are:
- Canada Post: Any post office will be able to generate a money order, with rates varying based on the amount of the money order itself.
- Banks: Especially if you are dealing with a large-scale or international transfer, you may want to work directly with your bank to manage the money order process.
- Credit Unions: Though you may require an account with the credit union, they do offer this service.
- Convenience Stores: Many gas stations and convenience stores offer money-sending services like Western Union, including these paper orders.
- Alternative Lenders: Places like Money Mart and Cash Money offer money order services in addition to their other products.
Benefits of Using a Money Order
There’s good reason for money orders remaining popular in the world of finances. Though it might come with a nominal fee, there is a proper way to move money in any situation. By understanding the advantages and potential risks, you can make a truly informed decision. There are a surprising amount of perks to using money orders.
Unlike cash, a money order can only be accessed by the intended recipient. It reduces the chance of the funds getting into the wrong hands and ensures a secure record of the transaction through the receipt and tracking information.
Though cheques offer similar security features to money orders, you can retain more privacy if you use a money order. Your cheque provides a written record of your bank account number that can be risky in the wrong hands. Plus, because cheques aren’t guaranteed, some locations won’t accept that payment.
Using a cheque? Watch out for cheque kitting scams.
Suited to Those Without a Bank Account
If you need to make a transaction yet don’t have a bank account, money orders let you provide guaranteed payment without the hassle. Since you can get a money order at places like Western Union or Money Mart, you don’t have to worry about making a file.
Money Orders Cannot Bounce
Unlike a cheque that only pulls money from the sender’s account when it is deposited by the recipient, the value lies in the money order itself. As a result, there is no risk of insufficient funds since the money has already been withdrawn from the account.
Withdrawing money from your bank? Watch out for bank withdrawal fees.
Enables You to Send Money Internationally
A money order is suitable for the international transfer of funds, though it may be harder to access. It is preferable to sending cash and offers more privacy than sending a cheque or internet transfer.
Drawbacks of Using a Money Order
Though there’s a host of benefits to money orders, it’s not without its disadvantages. In order to determine if this method of financial transfer suits your needs, it’s important to consider the downsides.
Lower Sending Limits
Typically, money orders have limits. In most cases, you won’t be able to get a money order for more than $1,000. The limit at Canada Post is $999.99. Other transaction methods, like sending money via e-transfer, are not subject to these limits.
Somewhat Outdated Method
Nowadays, you can pay bills, get a loan, and invest money without leaving home. Money orders are a different matter. You need to visit a location in person, and not every location takes all forms of payment. Many don’t take credit cards, meaning you are left with cash or debit to pay.
Credit Card Issues
Some locations will accept credit cards as a method of payment for a money order, though it comes with a catch. Many class the transaction as a cash advance on your credit card, so you end up paying noticeably more in interest
Money orders aren’t free. It’s a service you must pay for in order to account for everything from the time it takes to process to the paper on which it’s printed. The actual cost differs depending on where you get the money order. Though some locations are more competitively priced, the cost is always nominal (maxing out at $5). It’s usually better to choose where to get a money order based on convenience.
Mistakes Cost You
There are risks that go into putting cash value in a single piece of paper. If you misspelled the recipient’s name, they won’t be able to deposit the money order. If the order gets lost in the shuffle, it’s the equivalent of losing the cash value you applied to it. Provided the recipient hasn’t cashed the order, you might be able to get it cancelled. However, this process is tedious; and, if the vendor is willing to cancel it, you will owe a fee.
Need to send money for business purposes? Consider using Payoneer.
Money Orders Take Time to Process
Given the number of steps involved in dealing with money orders, many prefer other routes. Both you and the recipient will need to attend a location that deals with money orders to complete the transaction. As a result, most choose to only use money orders when it’s absolutely necessary.
Can I purchase a money order with my credit card?
Can I track my money order?
Are money orders safe to use?
Final Notes on Money Orders
Though money orders aren’t as widely used as they were in the past, they remain in circulation. By offering more anonymity than a cheque and more security than an e-transfer, they appeal to those worried about ensuring the funds arrive safely. Plus, they are available whether or not you have an active bank account. Though less convenient, the accessibility paired with the safety value helps money orders remain relevant in society.
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