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A money order is considered a safe way to pay for bills through the mail when you don't have a bank account.

If you don't have a checking account, or have ever tried to pay a bill, like rent, with a check that is returned for 'insufficient funds,' you may be required to pay in the future with a money order. 

What Is a Money Order and How Does it Work? 

Like a check, a money order is a document used for payment of a bill or debt, or even a means to transfer or send money through the mail. But, because money orders are paid for in advance, they are considered a better guarantee of payment than a check.

You don't need to have a bank account to purchase a money order. But you will need to pay in cash to the "issuer" -- the place preparing the money order for you.

Also, a money order must be signed by both you and the payee -- the person to whom the money order is written -- to be considered valid, and payment is guaranteed by whomever you paid in advance for the money order.

Money orders, however, typically have a $1,000 limit, so if you need to pay for something over that limit, you may have to use multiple money orders.

Where Can I Get a Money Order? 

Money orders can be purchased from the U.S. Postal Service -- at any U.S. Post Office, money transfer services such as convenience stores, supermarkets, grocery stores, or pharmacies, or Western Union (WU - Get Report) , Walmart (WMT - Get Report) , and banks or credit unions.

What Is the Money Order Fee?

Different providers charge different fees for money orders. Some issuers charge no fee, while others can charge a fee of up to $10 or more. Banks may charge as much as $5 or up to 10% of the money order value.

For example, Walmart charges a maximum fee of 88 cents, but "exact fees vary by location." The U.S. Postal Service, on the other hand, charges $1.25 for money orders up to $500, and $1.70 for money orders up to $1,000. The Postal Service also offers a 40 cent charge for Postal Military Money Orders, issued by U.S. military facilities. Western Union, meanwhile, charges from 50 cents to more than $1.50, depending on the location. And every CVS (CVS - Get Report) sells money orders, charging 99 cents per MoneyGram. But CVS won't issue a money order over $500, so if you need money orders for more than that, you'll again have to purchase multiple ones.

How to Send a Money Order

You need to pay up front for the money order and fee with cash, a debit card, or traveler's check. You also need the name and address of the person to whom you're paying with it, and an envelope with a stamp to mail it.

First, figure out how much money, exactly, you need to send, meaning check on what the fee will be to send it where you plan to send it; and remember, the fees are charged per money order, so if you have to purchase more than one, you need to account for it in the amount you bring to where you will buy it.

  • Add the fee for the money order to the total cost of the money order (or multiple money orders).
  • Have the exact total in cash, on a debit card, or in traveler's checks.
  • Make sure you have the full name and mailing address of the person to whom you're sending or paying with the money order.
  • If you're sending a money order overseas, make certain the country where the person receiving the money order is located is among the 30 countries accepting American postal money orders.
  • Complete the money order form including your address, as well as the address of the person to whom you're sending it.
  • Pay for the money order, and mail it in the stamped envelope to the person you want to receive it.

Are Money Orders Safe?

Money orders are considered safer than cash or checks in case of loss or theft. That's because you can cancel it if it hasn't been cashed by the person receiving it; you can reissue it to the recipient if it hasn't been cashed; and if it has been cashed by someone not the recipient, you can report them including details of where it was cashed, to law enforcement.

If the money order was stolen and cashed, however, you will not get a refund from the issuer. If it hasn't been cashed, and you have the receipt, you can provide the issuer with that information along with paying a cancellation fee and have another money order issued.

Potentially, if you fear the chances of losing or having your money order stolen warrant it, there are alternatives.

Wire transfers, for instance, eliminate paper that can get lost or stolen in the postal system. Banks can instantly transfer money from one account to an account at even a different bank.

A financial guarantee used in international business transactions - a letter of credit - is used when a bank sends another bank in another country a guarantee that a specified account holder in its bank has the funds to cover a transaction.

Similar to a financial guarantee, certified checks are guaranteed to be paid by the payer's bank, which guarantees the amount will be available upon redemption of the check. And, like a money order, certified checks must be endorsed by both the payer and the bank in a transaction, adding a stronger guarantee for recipients. The bank, by endorsing the certified check as genuine, acts as a third-party to promise availability of funds for the specific check.

If the funds are not available, or a certified check isn't accepted, the recipient can file legal action against both the payer and bank, who can both be held liable for failure to pay. Exceptions to the liability of the bank, however, include if a bank signature has been forged on a certified check, or if the check has not been redeemed within a set amount of time stipulated on the check.

Lastly, there are also cashier's checks. Cashier's checks work similar to certified checks, but add more protection for recipients. That's because they take the original payer almost completely out of the transaction. You need a bank account to request a cashier's check, and have to get it directly from your bank. You bank then endorses the check, guaranteeing to redeem its amount from the banks' own funds instead of from your account. Banks issuing cashier's checks usually subtract money from your account when you purchase the check, which is why they honor the cashier's check from their own reserves upon redemption.

It's never too late - or too early - to plan and invest for the retirement you deserve. Get more information and a free trial subscription to TheStreet's Retirement Daily to learn more about saving for and living in retirement. Got questions about money, retirement and/or investments? We've got answers.

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