What is a money order?

A money order represents a secure and convenient method of transmitting money or settling bills without the need for cash or a personal check. It is an appropriate document available in a particular place, for example, a bank, or post office. It gives details about a certain amount that an individual cash out or deposits to his/her bank account.

Here, we discuss the true meaning of money orders and their mechanisms of operation in Canada, the money order expenses, the pros and cons of utilizing money orders, and some alternate payment options available.

What a money order is and how it works in Canada

A money order represents the form of a paper document that acts as a cheque to make some kind of payment. Unlike a personal cheque, a money order is guaranteed because the amount is prepaid by the purchaser.

This makes a money order a reliable option when a cheque is not an acceptable form of payment, or if you wish to send funds through the mail but prefer not to send cash. In addition to being effective for people who don’t have a chequebook account or Interact e-transfer account, money orders can also serve as an alternative payment system.

For making a payment through a money order, the first step to be considered is purchasing it. This action will need the buyers already in place of the fund to be able to fully pay up for the money order and any service fees charged.

Here is an important note to remember that Canada Post and certain financial institutions impose a limit of less than CAN$1,000 per money order. There is still a money order fee. When purchasing, you’ll need to provide your name and potentially official government ID, along with the recipient’s name (the payee).

Where to purchase and cash money orders in Canada

You can also purchase and cash this money order at different places across Canada like banks, cooperative banks, post offices, and some retail outlets. The costs for purchasing a money order at different locations are as follows:

• Canada Post: $8.50 fee
• Canadian Imperial Bank of Commerce: $9.95 fee
• TD Bank: $9.95 fee
• Cash Money: Varies by location

Generally, to send money orders physically, you will have to go to the nearest bank or post office in person.

While you should carry a government-issued ID, it may not always be requested. At Canada Post, ID is required if you’re purchasing multiple money orders that total over $3,000.

The costs associated with money orders in Canada

Fees for money orders in Canada can vary depending on the issuing institution and whether the money order is for domestic or international use.

For example, Canada Post charges $8.50 for a domestic money order, while major banks like CIBC, TD Bank, and RBC charge around $9.95 for domestic and up to$15.00 for international money orders.

Fees at Cash Money locations vary. These fees can add up, especially for multiple transactions. Some places may charge extra fees for cashing money orders or may not accept them at all.

When it’s worth the cost

There are several scenarios where using a money order may be worth the cost:

• Lack of bank account or vredit card
• Privacy concerns
• Sending money via mail or courier
• International money transfers
• Need for a valid transaction receipt

Advantages and disadvantages of using money orders in Canada

Advantages of using money orders in Canada:

• Security:

Money orders represent an instrument of secure transfers since the direct cashable are the ones who cash this instrument. The risk of loss or theft associated with money is minimized in comparison with using cash.

• Anonymity:

Money orders do not bear the sender’s account number or any other financial information, enabling both the sender and the recipient to be anonymous.

• Accessibility:

The money orders are safe for those who do not have a bank account or credit card. They serve as a genuine reliable payment method, capable of adjusting to different situations.

• Traceability:

Money orders can be tracked, allowing senders to confirm delivery and recipients to verify receipt.

• Accepted by Institutions:

Cash orders are among the best recognized and accepted by banks, commercial entities, and even individuals as a viable payment means.

Disadvantages of using money orders in Canada:

• Cost:

The sender as well as the recipient may have to pay for money order fees, and higher prices compared to electronic transfers that do not include any cost for the involved parties.

• Inconvenience:

Buying and cashing money orders means going to a bank or post office in person, which can be annoying for some, should, to be precise.

• Limited amounts:

Money orders have a maximum value that is very important since it allows the amount of money that can be sent and received

• Processing time:

The processing of money orders may be somewhat prolonged compared to electronic payments, especially between different countries.

• Fraud Risk:

Although money orders may be secure, they can still remain vulnerable to fraud, including counterfeit and altered money orders as well.

In addition, it allows you to send money internationally and can be widely accepted in many countries, although it may not be available in different currencies, with the need to use dollars, for example. Another issue to consider is that this method can be considered a little outdated due to the many facilities available online.

Alternative payment methods to money orders in Canada

Electronic transfers and e-transfers

These methods include:

• Wire transfers:

These transactions are executed quickly thanks to their speed and secure nature, digital and bank transfer services can be used to transmit much higher volumes of money.

• Email transfers:

It allows you to send money to a person who does not have a bank account through online payment platforms, including PayPal and Stripe.

Bank drafts and cashier’s checks

Examples include:

• Bank drafts:

Cheques signed by a bank upon request of the customer may be passed through or deposited at a branch of a bank.

• Cashier’s checks:

Being transferred directly between the counterparts and issued by the banks into the receiver eliminating the need for personal documents.

Digital wallets and online payment platforms

Distinguished examples are:

• Google Pay/Apple Pay

Two types of global digital wallet that operate based on NFC technology and which can be used for payments, involving various funding sources, for instance, debit cards, credit cards, and bank accounts.

• Shakepay/Wealthsimple:

Two online platform options that offer online facility for financial transactions. Find out more about Shakepay and Wealthsimple by visiting their websites.

• PayPal:

A comprehensive online payment platform for remittances, online shopping, and also cryptocurrency transactions.

Final words

Transmitting money or paying bills in Canada through money orders, reduces risks connected with their transmission and simplifies the process. These are particularly helpful to the residents of Canada who are yet to join the banking facilities as well as a convenient alternative to cash or personal cheques.

However, they are equally costly and may be inconvenient because they make a buyer fill necessary papers including paying some fees. Things such as electronic transfers and digital wallets may turn out to be cheaper and more convenient as opposed to cash transactions.

In general, the analysis of the benefits and drawbacks of money orders could help Canadians to make the right decision about them to use the funds responsibly.