Money Order

What is a 'Money Order'

A money order is a certificate, usually issued by governments and banking institutions, that allows the stated payee to receive cash on-demand. A money order functions much like a check, in that the person who purchased the money order may stop payment.

Money orders are readily accepted and converted to cash, and are often used by people without access to a standard checking account. Money orders are an acceptable form of payment for small debts, both personal and business, and can be purchased for a small service fee from most institutions. Money orders were first issued by American Express in 1882, and later became popularized as traveler's checks.

BREAKING DOWN 'Money Order'

Advantages and Disadvantages of Money Orders

Since money orders are sold at post offices and many grocery stores and gas stations, they are easy to acquire by anyone who has cash in hand. They can be used for paying most bills and for many purchases. For sellers who are reluctant to accept checks, money orders offer a reasonably safe alternative. Since the purchaser immediately pays cash for the money order, there is no risk that it might bounce. Although there is a small possibility that the money order might not be genuine, this is relatively uncommon.

In some situations, paying with a money order can be safer than paying with a personal check. Since personal checks include the account holder's routing number and bank account number printed on the bottom, this private information can be stolen and used to create fraudulent checks. In contrast, money orders do not include personal information about the purchaser.

On the downside, money orders can be more difficult to track than a personal check. When a check writer wants to determine whether a personal check has cleared, he only needs to visit his bank or look at his online account for information about its status. To track a money order, the issuer must fill out tracking forms and pay an additional fee to learn whether the money order was cashed. The entire process of researching the status of a money order can take weeks. The United States Postal Service, however, offers an online money order inquiry service that allows buyers to input the money order number and get an update on its status.

When a purchaser pays for a money order, it comes with a receipt that includes the serial number of the money order. The purchaser should always keep this information until he is certain the money order has cleared. Without a receipt, tracing a money order can be difficult or even impossible.

RELATED TERMS
  1. Bracketed Buy Order

    A buy order that is accompanied by a sell limit order above the ...
  2. Payee

    The party in an exchange who receives payment. A payee is paid ...
  3. Stop Payment

    A request made to a financial institution to cancel a check or ...
  4. Check

    A written, dated and signed instrument that contains an unconditional ...
  5. Above The Market

    An order to buy or sell at a price set higher than the current ...
  6. Bracketed Sell Order

    A sell order on a short sale that is accompanied (or "bracketed") ...
Related Articles
  1. Professionals

    Types Of Orders

    Investors can enter various types of orders to buy or sell options. Some orders guarantee that the investor’s order will be executed immediately. Other types of orders may state a specific ...
  2. Brokers

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  3. Professionals

    TYPES OF ORDERS

    Order Execution Most customer orders, which are market orders or executable limit orders, will be routed electronically to the trading post for automatic execution. The electronic system bypasses ...
  4. Professionals

    Types of Securities Orders

    Securities Orders
  5. Professionals

    Order Types

    NASAA Series 65: Section 17 Order Types. In this section market order, limit order, stop order and stop limit order.
  6. Professionals

    Types Of Orders

    Investors can enter various types of orders to buy or sell securities. Some orders guarantee that the investor’s order will be executed immediately. Other types of orders may state a specific ...
  7. Professionals

    Types Of Orders

    Investors can enter various types of orders to buy or sell securities. Some orders guarantee that the investor’s order will be executed immediately. Other types of orders may state a specific ...
  8. Forex

    Entering A Trade

    The importance of executing the correct orders
  9. Professionals

    A. Introduction: Trading Securities

    Investors, who do not purchase their stocks and bonds directly from the issuer, must purchase them from another investor. Investor-to-investor transactions are known as secondary market transactions. ...
  10. Investing

    How To Start Trading: Order Types

    The types of orders you use can have a large effect on your trading performance, so understanding the different order types is important to your success.
RELATED FAQS
  1. What is the difference between a Debit Order and a Standard Order in a bank reconciliation?

    Understand the main differences between debit orders and standard orders a company may utilize and the factors in doing bank ... Read Answer >>
  2. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  3. What is the difference between a buy limit and a stop order?

    Learn the difference between buy limit orders and stop orders, including stop loss orders, and understand the risks of the ... Read Answer >>
  4. What is the difference between a stop and a market order?

    Learn about market orders and stop orders, how they are used and executed, and the main difference between stop orders and ... Read Answer >>
  5. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
  6. What's the difference between a stop and a limit order?

    Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center