Money Orders In Canada: What They Are And When To Use Them

Have you ever tried to send cash to someone in the mail but were worried about theft? Or perhaps you needed to make a payment to a landlord or business that would not accept debit cards or e-Transfers? Though most Canadians rely on digital banking, situations like these can still arise. If it happens to you, you can turn to a money order. While they are not as common as they once were, money orders remain a useful payment option in certain circumstances. 

In this article, we’ll explain what a money order is, how it works in Canada, and where you can get one. We will also review when a money order makes more sense over other forms of payment.

What Is A Money Order?

A money order is a prepaid paper document issued for a specific amount. It is made payable to a single, named recipient who can then deposit the amount or request a cash payout.

When you purchase a money order, you pay the value upfront. This means the issuing institution generally guarantees the funds. In this case, the issuing institution is either the government, a federally related entity, like Canada Post, or a financial institution.

A money order differs from a cheque. With a cheque, there needs to be enough money in the issuing account when the recipient deposits the cheque. If there isn’t, the cheque will bounce. That isn’t the case with a money order as the payment is certain. It is because of this certainty that some recipients request a money order over a personal cheque, or even cash.

How Does A Money Order Work In Canada?

Buying a money order is usually a straightforward process. You begin by visiting a financial institution, like one of the biggest banks in Canada, or another authorized provider. Because the instrument is prepaid, you must pay the full face value upfront, along with the issuer’s service fee, using cash or a debit card. You cannot pay for a money order in Canada using a credit card.

Next, you fill in the recipient’s information since the money order names the payee. This information is helpful if the payment is lost or if you need to request a replacement in the future. Make sure that you keep the receipt from the money order. If the payment becomes lost or stolen, you can use the receipt and serial number to check its status and request a refund.

Once received, the recipient can take the money order to their financial institution and either deposit or cash the money order. You can also cash a money order at your local post office, though they do not guarantee they will have enough funds available at all times.

Where Can You Get A Money Order In Canada?

Canadians can purchase a money order from a financial institution, like a bank or credit union, as well as other authorized providers, like Canada Post. Availability will depend on the issuer and the location as well as the currency requested. Fees and limits will also vary by institution, so it’s best to check directly with the issuer.

How Much Does A Money Order Cost?

The cost of a money order in Canada depends on where you purchase it, as each provider has their own fees and limits on the amount you can buy. For example, Canada Post charges CAD$8.50 per money order with a maximum value of CAD$999.99 per order. If you need to send more than that, you will need to purchase multiple money orders. That means paying the applicable fee on each. It is important to note that the fee is final, so even if you successfully request a refund later on, your fee is nonrefundable.

Each Canadian bank sets its own pricing as well. For example, getting a money order from CIBC costs CAD$9.95 regardless of the money order currency. BMO, meanwhile, charges CAD$5.00 per money order. We recommend reaching out to your bank directly for up-to-date pricing details.

When Should You Use A Money Order?

Money orders are not necessary for everyday spending, but they can be helpful in certain payment situations where security or certainty matter more than speed. Here are a few examples of when you should consider using a money order:

• When the recipient doesn’t want cash. One of the main reasons for this is that sending cash by mail is risky. It can get lost or stolen. This is why the Government of Canada says that “if you send money through the mail, don’t send cash.”
• When the recipient may not accept a personal cheque. Accepting a cheque runs the risk of a return due to insufficient funds. Money orders, on the other hand, are a guaranteed form of payment, reducing the uncertainty for the recipient.
• When you need a paper payment trail. Requiring information like the payment amount, issuer, and payee, money orders provide a physical payment record which can be helpful for rent, deposits or other official transactions.
• When electronic payments are not possible or practical. Some organizations, landlords or government offices may still request paper-based payments.
• When you want a lower-value alternative to a bank draft. For smaller amounts, a money order can be simpler and more accessible than a bank draft.

When A Money Order May Not Be The Best Choice

While money orders have their place, they are not always the right option. If the recipient accepts digital methods like Interac e-Transfer, consider this type of payment, as it is often faster and more convenient. All without sacrificing security.

Money orders may also be less suitable for larger payments as issuers typically set a maximum per-item limit. This means that sending a higher amount can require multiple instruments and, in turn, multiple fees. In that case, a bank draft or wire transfer may be more efficient. Money orders also have an associated fee that may not apply to these alternative options.

Tips On How To Use A Money Order Safely

If you plan to use a money order, there are a few precautions that can help reduce the risk of delays, loss or fraud.

• Write the payee’s full, legal name clearly and double-check the amount before handing over the document.
• Avoid leaving blank spaces on the money order as it can increase the risk of unauthorized alterations.
• Keep your receipt and serial number in a safe place. You will need these details in order to track the payment or request a replacement if it’s lost.
• Confirm the recipient can accept that type of money order. Some require payment in a different currency, for example.
• Ask about the refund steps and replacement policies so you understand your options if something goes wrong.