Money orders are pre-purchased from third party vendors, such as a bank, United States Postal Service, independent merchants and Western Union. The exact amount of the payment is bought and the third party issues the money order with a guarantee to pay the amount disclosed.
If you are a person who has received a money order, endorsing and cashing it is not much different than endorsing and cashing a check. If someone pays money due to you in the form of a money order, all you need to do is sign, cash and/or deposit the payment just like you would any other checks you receive.
When you cash or deposit your money order, the money comes from one of the aforementioned entities instead of being drawn on the bank of the person who has given you a personal check; a benefit to this is the fact it is a guaranteed payment.
The primary difference between using money orders and checks is from the payor’s perspective, not the payee’s. If anything, a money order is simply a more trustworthy form of payment as opposed to a personal check.
To endorse and cash a money order, here is what you need to do:
• Sign the back of your money order
If you flip over the money order and look at the back, you will see a space for your signature, sign your name on the line. Be sure and write legibly as you sign your name.
• Show ID
It may be possible to cash a money order without ID, but in the U.S. due to provisions in the Patriot Act, cashing a money order without identification is much more difficult to do than in the past. A driver’s license is probably your best bet in terms of identification.
• Determine where you want to cash the document
You can cash a money order at a bank, credit union, supermarket or at the place where the money order was originally purchased. Many independent merchants are often willing to cash a money order.
• Deposit into your personal savings or checking account
If you are planning to deposit the cash in your account, you can simply endorse your money order and deposit it into your personal account.
With all the similarities you might be wondering why people would bother purchasing a money order instead simply writing out a check? The reasons may vary, and here are a few of the top reasons why people purchase money orders to make a payment:
• No checking account
Most people have a checking account, but there are still individuals who prefer not to have a checking account due to privacy reasons or financial problems.
• The creditor does not take personal checks
Being personal checks can be risky, many creditors will ask for a money order or certified check for payment and will not take a check drawn on an individual’s checking account.
• Disassociation with the individual’s personal checking account
This may depend on the type of payment made, but some people, especially if they have a joint account, may not want a particular payment made against their personal account. In these cases they may opt to buy a money order instead.
Money orders are more trustworthy to creditors than personal checks are; in this respect a money order can be likened to a certified check. There are no worries of checks bouncing and as a result, a safe way to receive payment.
Other than this difference, which really does nott affect your ability to endorse, cash, or deposit the money order, the two are very similar from you, the payee, or in other words money order recipient’s perspective.