Money Order

By offering a secure and accessible substitute to cash and cheques, money orders allow you to transfer money to somebody else using a pre-purchased printed certificate.

Money orders ⁠— which are similar to yet crucially distinct from cheques ⁠— are sold across a wide variety of third-party institutions such as banks or postal services throughout the world. While particularly popular for domestic transfers in countries such as the United States, India, and Australia, money orders can also be sent internationally from one country to another, making them one of the many options you have for transferring money abroad.

Among the most tried-and-tested ways of sending cash, money orders could make sense for you if value privacy and flexibility when transferring cash within your country. They could also be especially useful if the recipient does not have a bank account of their own.

However, as with most things, some pros and cons go along with using money orders, including the hidden costs of using them to send money abroad. Savvy senders should be sure that the benefits make sense for them in the face of the alternatives.

How Money Orders Work

Simply put, money orders allow you to buy a certificate worth a pre-specified amount of money that can be mailed to somebody else. The receiver of the certificate is then, in turn, able to cash or deposit the money into their bank account as they see fit.

Although the precise steps may vary slightly depending on your location, in general, you’ll need to do the following to send a money order:

  • Purchase a money order certificate: These can be bought using a debit card or cash payment from many third parties such as banks, credit unions, post offices, brick and mortar retailers, and even at gas stations.
  • Fill out the money order form: The details you'll need to provide will usually include your name, your address or contact details, the recipient’s name, and the amount of money you wish to send.
  • Take note of the fees: These are charged over and above the amount being sent, and vary depending on which service you choose to send the money order.
  • Send the certificate to the recipient: Once received, the recipient can then cash the money order or deposit it into their bank account, both of which usually come at no cost. This can be done at any financial institution that deals with money orders in the recipient's area, and doesn't necessarily need to be the same service that sold you the money order in the first place.

As a result of these steps, money orders can indeed be a simple and accessible way of sending cash. What's more, because money orders are prepaid and can then be exchanged for cash, this method is an especially useful option for sending money to people who don't have a bank account of their own, and be done in a way that's guaranteed not to bounce.

On the other hand, however, because money orders don't require bank account details to be completed, they tend to be less transparent, potentially even leaving the door open to fraud.

Where Can I Go To Send a Money Order?

Money orders can typically be bought at post offices across the world. However, they are not available in every country, and it would be smart to check first whether or not the postal service in your country, or in your recipient's country, deals with money orders.

In addition to postal services, a broad range of third parties are often authorized by money order providers to sell the certificates too.

Take a look at the non-exhaustive list below to get a better sense of where you can go to buy a money order in a few countries around the world:

In the US, while money orders are sold by many third parties, their sale is authorized by only three providers: the US Postal Service (USPS), MoneyGram, and Western Union.

In this way, it's well worth noting that you may end up paying more in fees depending on which third party you choose to buy the money order from. For example, banks and credit unions will likely charge you more for the service than would a post office or convenience store.

Buying money orders with the USPS directly is one of the most common, accessible, and cheapest routes for Americans to send money in this way. Not only are they available for purchase in more than 30,000 post offices across the country, but domestic money orders with the USPS will only cost US$1.25 for amounts sent under US$500.00, and US$1.75 for amounts sent between US$500.00 and US$1,000.00 (which is the maximum that can be sent by money order with the USPS).

Money Orders vs Other Transfer Types

Money orders differ in several crucial ways from other methods of sending money:

Most notably, for instance, money orders are prepaid. This means that the money sent has no way of bouncing, as it may with a cheque when there are insufficient funds in the sender's checking account. In this way, money orders are almost guaranteed to reach the recipient, making them a reliable form of payment indeed!

Similarly to cash and cheques, however, money orders still rely on the physical transfer of funds. The money order certificate will need to end up in the recipient's hands in order for them to be able to use the money. In many circumstances, this can make them a rather slow and antiquated method of sending money, even if secure.

International Money Orders: Beware the Fees & Hurdles

While money orders can indeed be used to send money abroad, as a result of the higher fees and hidden exchange rate margins, as well as their limited worldwide availability, money orders are typically a poor option for international money transfers.

If you're planning to send money abroad using a money order (if it's possible with your provider in the first place), you can expect to incur the following types of fees:

  • Base fees: These vary from service to service, but these fixed fees usually considerably higher than the domestic fees. With USPS, for example, international money orders are capped at a maximum of US$700.00 (or US$500.00 for El Salvador and Guyana) with a fixed fee of US$10.25 on every money order.
  • Exchange rate margins: In addition to the base fees, you'll also be hit by an undisclosed exchange rate margin. In essence, this is the difference between the actual exchange rate and the exchange rate at which you're charged on your money order.

Another crucial tip for sending money orders abroad would be to make sure that the person or company to whom you're sending your cash can actually receive it.

If sending from the US, for example, USPS is only able to send money orders to these 28 countries, while Western Union cannot send money orders abroad at all. As such, we recommend that you talk to your money order provider to find out whether or not the country to which you'd like to send your money order can be serviced at all.

Alternatives to Money Orders

Primarily because of the limitations, but also because of the extra costs that come along with sending money orders abroad, we would recommend that unless your recipient has no bank account, you should avoid using money order to send cash internationally.

Instead, using a low-cost money transfer service alongside your existing bank account can help you not only to save on fees and exchange rates, but also to access worldwide accounts. And while international money orders can indeed oftentimes be cheaper than bank transfers — using a money transfer service is usually a cheaper option still!

For example, if you were to send US$700.00 from the USA to Mexico using a money order with USPS, you would pay US$10.25 in base fees as well as an undisclosed amount in exchange rate margins. With the money transfer service Remitly, you would pay no base fees and a total of US$9.30 in exchange rate margin fees (which are disclosed at 1.33% as of 27/08/2020).

Photo by Mason B. on Unsplash

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