What Are Money Order Scams and How Do They Work?


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Money orders are regarded as one of the most convenient, cost-effective, and safe ways to send money to someone. They are great alternatives if you are facing debit card declined errors.

But there is an increased risk that every recipient, whether a loved one or business partner, may be at risk for fraudulent activity by receiving a fake form of payment.

You can purchase money orders from retail stores in denominations between $1 and $500. These money orders are available through Western Union, MoneyGram, and Ria, among other money transfer services. There are many places to get a money order near me which is convenient.

A money order ensures that you will receive the entire value because your name is printed on it when issued by the money order issuer, making getting scammed very difficult, if not impossible. However, money orders can still fall victim to fraud.

What Are Money Order Scams

Money order scams are money order frauds. In money orders, money is sent in postal money orders by check to a recipient from the sender. Money orders are regarded as one of the safest ways to send money, but there is an increased risk that people may be at risk for fraudulent activity with receiving fake money orders.

These scams happen when the money order is never cashed or deposited by the recipient, leading to some form of criminal activity such as money laundering and other financial crimes. These fraudulent money orders can come in many documents, such as photoshopped images, altered, printed versions, and even stolen blank money order stubs, which are cut out and filled in for stolen monies.

How Money Order Scams Work

Money orders are regarded as one of the safest and most convenient ways to send money to someone. The funds will be deposited into your account instantly once it gets to the recipient.

how do scams with money orders work

It could almost be considered a form of instant online check cashing, but it’s not technically a “check.”

Fake Money Orders

When you buy a money order, the seller will provide a form with your name and the money order. The money order will then get sent via mail or dropped off at the post office.

A fake money order may be used if someone paid for one and copied down the information from the money order they purchased out of curiosity. In this case, you can always call up the post office and request that they do a money order lookup just in case if you want to verify whether or not it was fake.

Stolen Money Orders

Sometimes money orders can also be stolen if you have a money order that has yet to get to the recipient and someone stole it. In this case, money orders are straightforward to steal since they’re physically given to people, compared with, say, starter checks, money transfers, or third-party checks.

If your money order is fake and you have already cashed it out from the bank without noticing, then there’s nothing for you to do except recreating a money order by getting another one from the post office as if nothing happened at all.

You may not know whether or not a money order is real or fake until you cash it out in your bank account. Some forms of money orders will declare themselves counterfeit as soon as you drop off the money order at the post office.

The money in your account would get sent back to your bank account if you purchased a money order with a fake money order.

Why Money Orders Can Fall Victim to Fraud 

To simplify money transfers, money orders are a type of money transfer. The money order is a financial document purchased by a money sender and then sent to the money receiver while transferring funds from one party to another. Money orders also provide an easy and safe way of sending money from one country to another.

The majority of money order frauds involve fraudulent money orders that are made on pre-paid debit cards. The card’s information may have been skimmed before or when the money order was cashed out.

The victim might not report the fraud for fear of being arrested for credit card fraud or wire fraud if they used their money to purchase it. Victims may be afraid to report the scam because they feel embarrassed or lack knowledge of how money orders work.

However, you can purchase a money order with a gift card legitimately.

Money order fraud can take place in many forms and is conducted by dishonest individuals and organized criminal entities.

Some Common Ways That Money Order Scams Are Used

common money order scams used
Common money order scam sites & places include Craigslist, PayPal, & USPS

Fake Money Orders on Craigslist

Most victims fall victim to these types of crimes when using internet classifieds sites, Craigslist in particular, as was reported on an episode of “Nightline” titled ” Money Orders, No Problem. ” The scammer will contact the buyer through email using a fake name stating that they are stationed overseas and needs a foreign partner to buy items for them at stores such as Costco or Walmart because their military paychecks are not enough.

When it comes that time to pay for the items, the scammer will ask that the buyer buy an overpriced money order and send it as payment. The buyer believes that they’re helping out a soldier overseas. Still, when they purchase the money order and request the sender to cash it at Walmart, Costco, or their local Walgreens, they find that whether it’s been stolen in transit was not cashed by them, and the other party receives no money. Since it’s not possible to cash a check made to someone else’s name, a money order is the next best thing.

PayPal Money Order Scam

While you can send money anonymously on PayPal, fraud is also present. Fraudulent money orders are sent to people looking to buy something valuable through classified ads such as cars, bikes, or even houses. What happens is that these sellers will accept payment with a money order when someone buys their product but then the buyer sends them back all of their cash after cashing out the amount on the bank account of the seller themselves.

This type of fraud was created by scammers who use stolen money orders, fake identity documents, and fraudulent bank accounts to scam innocent people out of their hard-earned cash.

If you think that a PayPal money order scam has stolen your information, then you can contact the FBI fraud department.

Fake USPS Money Order

Another common way that this scam occurs is that the sender will contact their victim who sells products through eBay or Craigslist and state that they need to send a large amount of money to receive it. The buyer gets their payment via USPS money order but then finds out later that the check is not valid and has been reported as fake by the scammers.

Money Orders with Stolen Account Number

This scam can occur when an individual uses a debit card or credit card at an ATM or anyplace where a PIN is required. After using your bank account number and your PIN, always remember to verify that you’re signing off on the transaction by checking the amount for accuracy before completing it. It’s easy for someone to steal your information and then recreate the money order.

Money Orders Sent to Wrong Party

Another way that a perpetrator can steal your money order is by giving them an existing one with funds on it. This is commonly used in mail scams that request someone to cash or deposit a money order into their bank account as an advance payment for a job.

In these cases, the victim may receive a stolen USPS money order. They won’t know until after the bank has already put through the transaction that their check or money order had been cashed out without being sent over to its intended recipient.

You can read what is an eCheck and how does it work for other options.

Money Order PayDay Loan Scam

If someone contacts you saying that they want to borrow money from you but ask for it by using a payday loan online scam, this is a red flag. Payday loan scams are when the person sends out emails with the name of an actual lender, such as “Google Loans” or any other form of a legitimate company. The receiver will think that it is a legit company and may agree to the transaction. However, that will allow the thieves to steal your identity and take out loan payment after payment until they finally run away with all of your hard-earned cash.

The best approach to avoid this scam would be to refuse them right away if offered funds through these means. Instead, contact the company directly at their website and speak with a representative over the phone.

Tips for Avoiding Money Order Scams

There are some ways to protect and safeguard yourself from these scams to avoid the risk of receiving a fake money order scam.

Use a Counterfeit Detection Marker

One way is to purchase a counterfeit detection marker, which will help you detect a fake money order before sending payment. Be wary of people trying to sell you money orders for lower prices, and be sure to compare the price with the price at the post office or store. If someone wants you to send them wire transfers instead of just a plain money order, they could be trying to scam you, and it might be hard for law enforcement officials to trace their actions because wire transfers can’t be traced.

tips for avoiding scams with money orders
Use counterfeit detection markers, scrutinize classified ads, and use other payment methods to avoid being scammed

Finally, if someone asks you for personal information, including your address or social security number, this should be an immediate red flag.

Money order scams are a big concern in the US today, so the Federal Trade Commission has warned people about these scams and what to look out for.

  • One scam type involves buyers who use stolen money orders to purchase merchandise or goods online from legitimate sellers. The seller sends the product along with their bank account information to the buyer, who then cashes out all of the money from your bank account, leaving you with nothing but a negative balance in your bank account.
  • Another type involves someone purchasing something over the phone using either fake or real money orders and asking the seller to wire transfer them back some money instead of just giving them cash.

If it’s possible, try not to have any sensitive personal information sent through an email, such as your social security number or bank account information.

Scrutinize Classified Ads

Another thing to look out for is that when you buy a product through local classified ads, money orders will usually be accepted as payment. Still, if someone asks you to pay in cash or a wire transfer, this is another red flag because most companies and personal sellers always prefer receiving a credit card instead of anonymous forms of payment.

If there’s anything suspicious about the money order you are getting, try contacting your local post office and ask them if they have seen any counterfeit money orders being passed around by people trying to scam other people.

If you possibly think someone might be trying to scam you out of some of your hard-earned cash, then please get in touch with your local law enforcement officials immediately.

Use Alternative Payment Methods

Consider using other forms of payment. Research the differences between a cashier’s check vs. a certified check to see if those are acceptable. 

If you are purchasing for yourself, consider going to a store instead. Many stores offer buy now pay later no credit check as a form of payment. 

You can also shop online with eCheck purchases if you don’t want to use credit or a money order.

How to Avoid Getting Scammed with a Money Order

There are different ways that you can do about money order scams:

Know Who You Are Buying Money Orders For

You should only purchase money orders for someone you trust and are trustworthy enough not to copy down the information of the money, steal, or do anything to it, such as sending it off before receiving it from the recipient.

Use Registered Mail

You could also try mailing them through registered mail or an alternate shipping method if possible. If the person doesn’t receive their money order within two weeks, then it’s safe to assume and report that your money order has been lost, accidentally thrown out, or stolen.

Be Aware and Safe

You should have a good reputation for checking and confirming the information on the money order itself so you can double-check if it’s accurate before sending anything to them, such as personal or sensitive information.

Related Questions:

Are Money Orders a Safe Way to Transfer Money?

Yes, it’s safe if you make sure that whoever or whatever company you’re sending the money orders for is trustworthy enough and reliable for not stealing your cash or information.

Can You Cash a Fake Money Order?

Yes, especially if you are a money mule yourself where you take a risk by cashing out fake money orders that might have been purchased from someone else. You also become vulnerable when there is pressure to do this within your community or through family members who convince you it’s safe.

You will then become an accessory to the crime if you go through with it, and most local law enforcement agencies will consider you an accomplice on fraud charges for selling the stolen cash in exchange for your gain.

Conclusion

The risk of sending money orders is that there are different ways somebody might be trying to scam you out of some cash, and it’s possible for the seller or receiver to fall victim.

The best practices are to watch out for somebody who may be trying to get you involved in a money order scam. If you think someone is scamming you, be sure to get in touch with your local law enforcement officials immediately.

BG Vance

For over 20 years, BG Vance has been a leader in public and personal financial management. He's developed and managed public budgets in excess of hundreds of millions of dollars. He is passionate about the FIRE movement and was featured in the Detroit News in 2001 about saving for retirement. Through the years, he's assisted families and individuals with getting their finances on track. He holds an MPA, is a licensed Realtor, and is currently working on a book about personal finance.

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