The Ultimate Guide to Money Orders in Canada

Are you looking for a secure way to send money? If so, you might want to consider a money order. No bank account? No problem! You can still send and receive money.

If you’re sending someone money by traditional mail, a money order is one of your best options. They are a secure payment that only the receiver is able to cash in. We’re going to go through what exactly a money order is, when you should use one, and how they work.

But first, what is a money order?

A money order is a secure payment method that can be safely sent by mail. It is a prepaid financial instrument that can be used to pay for goods and services or to send money to another person.

Money orders in Canada are issued by financial institutions, post offices, and some retail locations, making them a widely accessible payment method. That means you can send a money order without a bank account or credit card. Canada Post limits the amount of a money order to $999.99 CAN. 

It’s also important to note that you can only purchase and cash money orders within Canada. If you need to post an international money order, this can be done at one of the big banks in Canada.

What’s the difference between a money order and cash?

A money order and cash are both forms of payment, but they have several differences that make each more suitable for specific situations. Money orders are particularly useful for situations where the sender or recipient may not have a bank account or when a more secure and traceable form of payment is preferred.

Cash, while widely accepted and convenient for in-person transactions, does not offer the same level of protection and traceability. Here are the main differences between a money order and cash:

Security

A money order is far more secure than cash. Money orders are made out to a specific payee, which means that only the person or entity named on the money order can cash or deposit it. This reduces the risk of theft or loss. In contrast, cash can be easily stolen or lost and used by anyone who possesses it.

Traceability

Money orders can be tracked and verified, offering a clear paper trail that proves a payment was made. Each money order has a unique serial number, which allows the sender to monitor whether it has been cashed or deposited by the recipient. Cash, on the other hand, is challenging to trace, and once it changes hands, there is no record of the transaction.

Issuance

Money orders are issued by financial institutions, post offices, and some retail locations. They must be purchased with funds upfront, and the purchaser receives a receipt as proof of the transaction. Cash, however, is simply a physical representation of currency and does not require any specific issuance process.

Acceptance

While cash is widely accepted for most in-person transactions, some businesses or individuals may prefer a money order for certain situations, such as large payments, online transactions, or payments sent by mail. Money orders can provide an added layer of security and traceability that cash does not offer.

Accessibility

Money orders can be a more accessible payment option for individuals without a bank account, as they do not require the sender or recipient to have a bank account to purchase, send, or receive the funds. Cash is accessible to everyone, but it lacks the security and traceability of a money order.

What’s the difference between a money order and a personal cheque?

A cheque can be safely sent through the mail but they’re not a guaranteed form of payment. Personal cheques drawn on your bank account are simply an “I Owe You” document that authorizes a bank to withdraw money from your account and deposit it into the recipient’s account at the time the cheque is cashed or deposited.

However, there’s no guarantee there will be enough money in your account on the day your recipient decides to cash or deposit the cheque. That could cause the cheque to bounce incurring fees for both you and the recipient, leaving the recipient without the funds you promised.

A money order is paid for in full before it is sent to the recipient, and that money is held in a special internal account by the institution issuing the money order. The funds are guaranteed, which means there is no longer a risk that the cheque could bounce when the recipient goes to cash it. 

Since you need a chequing account in order to send a personal cheque, it’s not the most convenient payment method for some. As mentioned before, you don’t need to use your bank account to purchase a money order. For example, you can purchase a money order with cash at Canada Post.

However, personal cheques may be more convenient for individuals with a bank account, as they can be written and issued without the need to purchase them upfront like money orders.

Is a money order safe?

Yes, money orders are a safe method of payment. Money orders are either purchased at Canada Post or financial institutions like credit unions and Canada’s Big Banks. They use a variety of anti-counterfeiting features to make the process of sending money by mail secure. These features include:

• a barcode serial number
• polarized ink
• a security code 

The security code will be verified when the receiver goes to cash it. As a sender, you have to provide information about yourself and the recipient. This ensures that only the person who is receiving the money order can cash it and get the money. In most cases, this will require a form of ID to be shown by the sender and receiver. All of these efforts work to reduce any risk of fraud or theft.

Beware of money order scams

While a money order is safer than cash, it is not a perfect form of payment. It is essential to be cautious of scams involving money orders. A common money order scam often involves counterfeit or altered money orders.

One prevalent con is the overpayment scam, where a fraudster sends a money order for a higher amount than the agreed-upon price for a product or service. They then ask the victim to deposit the money order and return the excess funds via a non-traceable method. Once the victim sends the excess funds, the money order is revealed to be counterfeit, leaving the victim responsible for the loss.

Avoid using money orders unless you know and trust the recipient and be wary of requests for payment via money orders from unknown individuals or organizations. To prevent getting scammed, always verify the authenticity of money orders and be cautious of transactions that seem suspicious or too good to be true. If you are vigilant and use money orders correctly, they can be a safe and reliable form of payment.

What are money orders usually used for?

Money orders are commonly used in Canada for things like ordering something from a magazine or a big-ticket purchase. But now that there’s the internet and e-Transfers, money orders aren’t as common.

However, for Canadians that have limited access to banking, it’s still a great way to safely send money. Here are some of the reasons that money orders would be used for:

You need to send a secured & guaranteed payment through the mail

You don’t want to send cash by mail for obvious reasons. The letter may be lost or destroyed with no way to prove the package was received. If you send it by registered or trackable mail, you can determine that it was received. However, this kind of service can be pricey. Ultimately, a money order is a more efficient means of sending money by traditional mail.

You’re buying something and the seller wants payment by money order

There are a variety of reasons that a seller may want you to send a money order to pay for something. Perhaps they don’t have a bank account or they don’t want to deal with fees associated with other forms of payments. They may request a money order instead of a cheque because a cheque can potentially bounce.

You don’t have a bank account

Not everyone has a bank account, which makes paying for things a little trickier. If you can’t write a cheque because you don’t have a chequing account, a money order is one of your only alternatives for safe payment. You can go to a Canada Post with cash and buy a money order worth up to $999.99. You can give the teller the cash in person and then send your bill payments by post.

You’re making a large purchase in-person

Money orders are great when you don’t want to carry a lot of cash. If you’re making a larger purchase and buying it in-person, the seller may not have other means of accepting a large amount of cash. This is where a money order can be really helpful. 

If you’re purchasing tech toys or a used car from someone, this is often a cash transaction. If you’re not comfortable with carrying thousands of dollars of cash around, you can purchase a few money orders for a more secure process.

You want to protect your financial information

If you’re paying for something and the seller is a stranger, you may not want them to see your financial information. Personal cheques display your bank account, route, and transit numbers on the bottom, and may also include other personal information like your full name and address. Money orders don’t have any of your financial information on the slip. It only includes your name and address.

You want a valid receipt of the transaction

All money orders will have a tracking number and official receipt so you can see when it was cashed. There will be a third-party receipt that verifies the amount of the money order. That way, there is no dispute about the amount of money you’ve given. 

Purchasing & cashing money orders

It’s incredibly easy to send and receive money orders. We’ll go through how to buy a money order and how to cash one as well.

How to purchase a money order

You can purchase money orders at Canada Post, a bank or a credit union. You have to purchase a money order in person as it’s a physical form of payment. There isn’t an option to buy a money order online.

Canada Post only offers money orders in Canadian dollars. However, if you need to send a money order with an international currency, you can do so at a major Canadian bank.

A money order from Canada Post is limited to $999.99 but you could purchase multiple money orders if you need to. Do be aware that you’ll have to pay a fee for each individual money order. If you need a money order for more than $999.99, you’ll need to go to a financial institution like a bank or credit union. Alternatively, you can get a bank draft or certified cheque if you’re looking for higher limits. 

You’re not able to buy a money order with a credit card. This is because funds on your credit card aren’t guaranteed. You are only able to purchase money orders with your debit card, cash payment, or out of your chequing account if you purchase a money order from your own bank.

How much does a Canadian money order cost?

Fees for a money order vary depending on where you purchase it from. Canada Post charges you $7.50 for a money order in Canadian funds up to $999.99. The cost of purchasing a money order from your bank depends on the bank you’re using. BMO charges $9.95 and you can opt for Canadian, US, or British Pounds. RBC is less at $8.95 and offers the same currencies as BMO plus the option of Euros. 

How to cash a money order

When you receive a money order by mail, you just need to go to a Canada Post teller with your photo ID. If you go to your bank, you’ll need identification as well.

Cashing a Canada Post money order

You can cash your money order at no charge when you visit a post office anywhere in Canada. If it’s payable to a business or organization, it can be cashed at the organization’s bank of choice.

You must show ID to verify that you are the recipient of the money order. Having a government photo ID of any kind should suffice. If for some reason, you don’t have photo ID, you may be able to show a utility bill with your name on it and something like your birth certificate. While it’s a government ID, there is no picture.

Cashing a bank money order

If you’ve received a money order through a Canadian bank but you’re not in Canada, you have to visit one of the local branches or banks that the Canadian bank has an alliance with. You have to prove your identity with photo ID. Cashing a money order is almost always free if you’re cashing it at an affiliated location abroad. If you’re cashing it in Canada, it’s free as well.

Is a money order legit?

The transaction may be looked at if it seems suspicious. This can lead to an audit with consequences if there’s proof of fraudulent behaviour. Canadian law does this to track money laundering or other forms of fraud.

Alternatives to money orders

Money orders are great for Canadians that don’t have access to bank accounts or means of sending money electronically. There are different ways to send and receive money. They come with features, fees, and limitations.

Money order: $7.50 – $9.50

These are secure as they can only be cashed by the receiver. You only need to go to Canada Post and does not require you to have a bank account. You’re limited with the currencies you can use and they can only be cashed with Canada Post or by the bank that issued the money order.

Interac e-Transfer: $0 – $3.00

Banks and the type of bank account you have defines how much your Interac e-Transfer will cost. Many times, your bank will offer at least a few free e-Transfers per month. There is never a fee to receive money. Interac e-Transfers are secure, reasonable, and take less than 30 minutes in most cases. You can’t send them internationally and both you and the recipient will need a Canadian bank account. 

International money transfer: fees for sender and receiver

International money transfers can be sent in many different ways. They are secure methods and are relatively inexpensive. They can take a few business days to be accessible to the receiver. The Big Banks can send international money transfers through the SWIFT system, but they may charge higher fees.

These types of transfers can also go through a third-party company like Wise, which is generally faster and cheaper. It’s best to do some research so you can get the best rate for sending an international money transfer.

Wire transfer: dometic is $0 – $30, international is $35 – $50

A wire transfer is highly secure as it occurs across banking networks. It takes up to 2 days for the recipient to gain access to the funds. A wire transfer is useful for large sums of money.

Bank draft: $7.50 – $8.50

Bank drafts can cost up to $8.50 but if they might have no charge if you have a premium bank account. The bank draft is also a physical document but it differs because there is no maximum amount. You aren’t able to send it by mail and banks may put a hold on some of all of the funds until the draft has been processed.

Certified cheque: $5.00 – $15.00 

Certified cheques may be free depending on your bank and the account you have. The bank certifies that you have the money in your account for the amount you want to have on the cheque. Once you’ve gone through the process, the funds are not accessible to you. Quite a few Canadian banks have stopped offering certified cheques and redirect you to send money by e-Transfers instead.

Regular cheque: $0

If you have a chequing account, you’ll likely get free cheques to use. There are a few issues here. Funds aren’t guaranteed so cheques can bounce. This isn’t good for you as you’ll have to pay an nonsufficient funds (NSF) fee and the receiver won’t get their funds. It can take a few days to clear a cheque and it contains all of your sensitive bank information right on it. There have been so many fraudulent cases of personal cheques that many merchants simply won’t accept them.

Peer to Peer payment apps: fees vary

There are so many payment apps like Venmo, Wealthsimple Cash, and Paypal, so how much you pay will widely vary. Usually, you pay a minimal fee and/or a percentage of the amount being transferred. When you use your credit card, you’ll likely have to pay higher fees. 

It’s a fast, convenient, and secure way to send money online. Depending on what service you use, limits can vary. When you withdraw from the app into your bank account, it can take a few business days. Most of the time, you can’t use these apps for international transfers.

As you can see, there are a lot of ways you can send money to someone. A money order is a great option if you’re looking for security and have cash in hand. Yes, there are limits so if you need to send a lot of cash, you may want to consider other avenues.