How do money orders work in Canada?

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How do money orders work in Canada?

Rounding it up

  • A money order is a secure way to make payments through Canada Post.

  • Money orders are good alternatives to cash payments because they can only be redeemed by the designated payee.

  • Using a money order can also be helpful if either you or a recipient doesn't have a bank account because you can redeem them at any Canada Post location for cash.

  • Canada Post guarantees all money orders, so you can get a refund for your payment if it gets lost or destroyed.

  • There are a few downsides to money orders, especially if you need to send money quickly. If you need a fast and cheap payment method, consider making a free Interac e-Transfer through your KOHO account instead.

6 min read

Gaby Pilson
#money order#safety#fraud prevention

From cheques and bank drafts to PayPal and Interac e-Transfers, Canadians have a whole host of different ways to send and receive money. But of all the different money transfer options available in Canada, few cause as much confusion as the money order.

A money order is a type of physical payment that you can use to send funds to individuals and businesses via Canada Post. Money orders are one of the most secure physical payment methods out there and they’re particularly popular among people who don’t have bank accounts.

But if you’ve never used a money order before, the idea of sending funds through the mail might sound a bit far-fetched.

To help you understand how money orders work in Canada, we’ve put together this helpful guide. Up next, we’ll discuss the basics of money orders, including their fees, features, pros, and cons, so you can decide whether using one is right for your needs.

What is a money order?

If you’re reading this article, chances are pretty high that money orders aren’t exactly something you deal with on a regular basis. In fact, in a world that’s quickly moving toward becoming a cashless society, it’s totally understandable if you’ve never even heard of a money order before.

So that raises the question: what even is a money order?

A money order is a type of mail-based physical payment method. In other words, a money order is a piece of paper that you can mail to a business or individual in order to send them money, either as a gift or to pay them for goods and services. This makes money orders similar to a cheque, but with some unique security features and benefits.

In Canada, the vast majority of money orders are what we call a postal money order, which is defined as a “certified, cashable document guaranteed by Canada Post.” These postal money orders are backed by the government and they can be used to send and receive funds at any Canada Post branch in the country.

You can also get money orders from private companies like Western Union. But an official postal money order from Canada Post is what most people are referring to when they use the term ‘money order.’

Pros & cons of money orders in Canada

Even though money orders aren’t as popular as they used to be, they do have many advantages. Some of the main benefits of postal money orders include:

  • No bank accounts necessary – A key advantage of money orders is that they let you send and receive money without the need for a bank account, since you can pay for them with cash. The recipient of a money order also receives their funds from Canada Post in cash, so they don’t need to have a bank account either. As a result, money orders are powerful tools for the many people who are underbanked in Canada.

  • Secure & guaranteed transactions – Funds that you send via a postal money order are backed by Canada Post, which is a Crown corporation. If your uncashed money order is destroyed or lost, Canada Post will even give you a refund. Plus, money orders are much more secure than sending cash in the mail (which you generally shouldn’t do anyway) because they can only be cashed by the designated payee.

  • Trackable money transfers – All postal money orders are trackable and traceable by Canada Post. Since each money order has a unique serial number, Canada Post can quickly determine whether your recipient ever cashed their payment. This is a very helpful feature if you end up in an argument with a payee who claims that they never received their money. If your payee claims that they never received their funds, you can call Canada Post’s Money Order Verification Service to learn the status of your money order and settle your dispute.

  • Protects your personal information – Even though postal money orders are particularly popular among people who are underbanked, there are reasons why people with bank accounts might want to use them, too. In particular, money orders can be helpful if you don’t personally know your payee. That’s because you only need to disclose your name and address when you send money orders. Conversely, when you send money via a personal cheque, you’re effectively exposing your banking details to your recipient. This can be a privacy and security concern if you don’t know who you’re sending money to in the first place.

As is the case with most things in the world of personal finance, though, there are downsides to using money orders. Notable drawbacks to money orders include:

  • Transaction speed – Domestic mail sent via Canada Post—including money orders—typically takes between 2 and 4 business days to arrive at its destination. This isn’t particularly slow given the large size of Canada, but it’s definitely not fast when compared to online payment methods. If you need to send money to someone quickly, consider using something like an e-Transfer instead. You can set up an e-Transfer from within the KOHO app and your money will typically arrive in your recipient’s account within an hour or two.

  • Processing fees – Money orders aren’t free, so you should be prepared to spend a bit on fees whenever you send one. Canada Post has a flat rate fee for money orders, which was around $7.50 the last time we checked. For larger sums of money, this fee isn’t bad. But it’s a bit high for smaller transactions, especially when you consider that you can get free e-Transfers with your KOHO account.

  • Spending limits – Canada Post limits the value of an individual money order to no more than $999.99. If you want to send $1,000 or more to the same person, you can always purchase multiple money orders. However, it’s usually easier to make larger transactions using an online payment method than it is to sit there and fill out multiple money orders.

Also, keep in mind that postal money orders are primarily designed for use within Canada. In the past, it was possible to send money orders to people in other countries, but Canada Post seems to be cutting back on international funds transfers. In other words, if you want to send money across international borders, you’d likely be better off using something like a SWIFT transfer or PayPal.

Step by step guide to sending & receiving money orders in Canada

At this point, you’re well versed in the pros and cons of money orders in Canada. Now that you understand the benefits of money orders, you might be wondering how you can use one to send and receive funds.

Thankfully, the process is quite simple. Here’s a 4 step guide to using money orders in Canada to get you started.

Step 1: Go to a Canada Post branch

If you want to send someone a money order, your first task is to go to a Canada Post branch. In some cases, you can get a money order at a bank branch, but not all financial institutions offer this service, so it’s generally best to go straight to a post office.

Before you head to a post office, you’ll need to gather the following items:

  • Cash or debit card for your payment

  • Payee’s name and address

  • Government-issued photo ID (if you’re buying more than $3,000 worth of money orders)

The biggest thing to remember here is that you have to pay for your money order in cash or with a debit card. Canada Post won’t accept credit card payments for money orders. So come prepared with enough cash on hand or in your bank account to cover the cost of your money order and any applicable fees.

Step 2: Purchase a money order

Once you gather all of the information you need for your money order, it’s time to head to a Canada Post location and finalize your transaction.

To buy a money order at Canada Post, do the following:

  • Tell the representative at the register that you want to purchase a money order, and inform them of how much you wish to send.

  • Write down your name and address on the money order document.

  • Provide the name and address of your payee on the money order document.

  • Pay for your money order (and any applicable transaction fees) using cash or a debit card.

  • Show your government-issued photo ID if you’re buying more than $3,000 worth of money orders at once.

As soon as you finalize your payment, your postal money order is ready to be sent to your recipient.

Step 3: Send the money order

After you buy your money order, your next step is to ensure that your funds get to your payee. Each money order includes the cost of postage, so you can simply drop your completed money order document in the mail and it will make its way to your recipient.

However, there’s no requirement that you send a money order in the mail. You’re also allowed to physically hand money orders to someone if you’d rather not mail them, but it’s up to you to decide how you want to deliver your payment.

Step 4: Cash the money order

Once your payee receives their money order, they can take it to a Canada Post location to get their cash. They’ll need to show a copy of their government-issued photo ID to receive their cash, regardless of how much the money order is worth.

You can cash money orders at some bank branches in Canada, too. But many banks charge fees for this service, so you can typically save a few dollars by going directly to a Canada Post location instead.

Money orders: the best money transfer method?

Money orders may not be the most popular way to transfer money, but they can definitely come in handy. If you need a secure, guaranteed, and traceable way to send funds to someone—especially if they don’t have a bank account—a money order is one of your best options.

Of course, there are downsides to using money orders, especially for large transactions or if speed is a priority. In these situations, you’ll likely be better off using a digital payment method like an e-Transfer, which you can process in minutes using your KOHO account.

But there you have it, folks, that’s everything you need to know about money orders. Even if you never opt to send a money order in the future, you now have all the knowledge you need to select an appropriate funds transfer method for your needs.

Gaby Pilson

Gaby Pilson is a writer, educator, travel guide, and lover of all things personal finance. She’s passionate about helping people feel empowered to take control of their financial lives by making investing, budgeting, and money-saving resources accessible to everyone.

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