When to Use a Money Order

I grew up watching my mother write out checks to pay our bills, so I understood the concept of a checking account - but I never knew what a money order was. Oddly enough, I remember watching countless TV infomercials peddling gimmicky products that could be paid for “by check or money order.” When I asked someone in college to explain a money order to me, I was told that it was a way for transient people without checking accounts and credit cards to pay their bills. While this is partly true, I learned that there are a variety of occasions when it is not only appropriate but also prudent to use a money order in place of cash or a check.

First, for those unfamiliar with money orders, here is a brief summary of the concept:

A money order is a special kind of prepaid check that was originally designed so that people could send funds safely through the mail. Sold by post offices, grocery stores, Western Union, and even some banks, money orders are a bit like cashier’s checks or certified checks, though they usually have caps around $1000. They are purchased by someone who pays cash up front (or uses a debit card) and are thus not in danger bouncing the same way a personal check could. The exact amount for which the money order is redeemable is printed on both the order itself and on the receipt kept by the purchaser, who then fills in the payee’s name and address. Typically, money orders cost between 50 cents and a dollar – plus the amount of the money order itself. Postal money orders, sold by USPS at post offices, are considered the safest and hardest to counterfeit.

So, you’re still wondering when to use a money order? Although they seem like more trouble than they’re worth, consider these situations: