Wire Transfer vs. Money Order: What Is the Difference?

Sending money for large transactions, like a home closing, requires a quick, reliable and secure method. Wire transfers and money orders top the list of the most popular funds transfer methods for situations like these, but which is superior, and should you be using either at all? Here’s what you need to know about a wire transfer vs. money order and the differences between them.

What Is a Wire Transfer?

Often confused with automated clearing house (ACH) payments, wire transfers are a swift way to move money from one financial institution to another. While ACH payments must pass through a national clearinghouse and could take days to process, wire transfers are quick, often offering same-day access to the money that’s sent.

Wire transfers aren’t free, though. Most banks charge up to $25 for using a wire transfer, and some even charge up to $20 to the recipient of a wire transfer. That’s small change if you’re dealing with thousands of dollars for a down payment, but the fees do add up, especially for real estate companies.

Wire transfers are handled directly by the banks, so there’s no third party involved in the processing like there is with ACH payments. Initiating a wire transfer is straightforward, and many banks allow customers to send a wire using their online banking portal. Other banks may require the customer to call their support line, and some require a signature to initiate a wire transfer.

With all of that in mind, the convenience and speed of a wire transfer are hard to beat, although both parties will end up paying a fee for those perks.

What Is a Money Order?

Money orders can be purchased at a post office, certain banks, and through some third-party businesses that offer money services. You can purchase a money order even if you don’t have a checking account, and you can send a money order even if you don’t know the banking details of the recipient. This makes money orders a popular choice for large gifts because it’s a safer alternative to mailing cash.

Purchasing a money order is easy, but it requires the sender to hand over the full amount they want to send, plus any fees, at the time of ordering. The average fee for a money order is generally less than $5.

The sender can cover the amount they wish to send and any fees using cash, a debit card or even a credit card. However, using a credit card will lead to additional fees and/or higher interest on their credit card statement, as most credit card issuers treat money orders as cash advances.

Once a money order is purchased, it can be mailed or handed to the recipient. The recipient has to be specified on the money order, and they’ll need to show identification in order to cash the money order. Money orders can be cashed at any post office, some retailers and most banks and credit unions. They can also be deposited directly into the recipient’s bank account like a check.

Wire Transfer vs. Money Order: Key Differences

Money orders and wire transfers clearly work differently, and this results in some inherent disadvantages for both methods. Here’s a closer look at the key differences that set these two methods apart.

Processing Time

Wire transfers are the clear winner for speed. Not only can a wire transfer be initiated online, but the funds are generally available in the recipient’s account on the same day. This expedient process is ideal, especially for home closings where everyone wants to move the process along swiftly.

Meanwhile, money orders must be purchased in person and then either mailed or handed to the recipient. The time in transit alone can take days for the money order process. Once the recipient has the money order in hand, they’ll need to take it to their bank or a qualifying location to deposit or cash it. If depositing the money order, the funds are typically available the following business day.

Fees and Limits

While wire transfers are significantly faster than money orders, they do lose with fees. Wire transfers cost both the sender and the recipient, and fees vary depending on the bank and the amount of the transfer. Money orders, on the other hand, cost less than $5 to send.

However, while money orders have a substantially smaller fee than wire transfers, they also have a significantly lower limit. Wire transfers are generally unlimited or capped at a large amount, like $10,000, depending on the bank and the relationship the sender has with their bank. Meanwhile, money orders are limited to just $1,000, which typically isn’t ideal for real estate transactions.

Security

When it comes to security, wire transfer vs. money order is an easy pick. When a money order is issued, the sender will need to fill out the recipient’s name and address. In order for the recipient to cash the check, they’ll need to display legal identification (like a driver’s license) that matches the information on the money order. However, just like checks, money orders can be lost, stolen or damaged—risks that become especially pressing if you’re sending them through the mail.

Wire transfers move funds directly from one bank account to the other. The only room for error with a wire transfer is entering the wrong details for the recipient’s bank account, but even then, you might be able to contact your bank to have the transfer reversed. Having a money order canceled or reversed is much tougher.

The electronic nature of wire transfers also makes them more secure because they’ll be processed directly by the bank(s) with no third parties ever becoming involved. This is what makes them fast and convenient, too.

Wire Transfer vs. Money Order; Which is the Best Method for Real Estate?

When you’re comparing a speedy, secure, and convenient funds transfer method like a wire transfer with an old, limited, and slow method like a money order, there’s a clear winner between the two. However, that doesn’t mean that wire transfers are the best option overall. If you’re looking to achieve the same speed and security wire transfers offer but with improved transparency and reduced fees, you should explore paymints.io.

Paymints.io is helping title companies revolutionize the payments process and put an end to slow money orders and expensive wire transfers. With paymints.io, there’s no more guesswork to be had with closing costs or vendor disbursements or questions like choosing between a wire transfer vs. money order. Interested in learning more? Schedule a demo today!

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