Money Down the Drain?
June 11, 2010 12:58 AM   Subscribe

What happens to a money order when the place that issued it closes?

The leasing office for my apartment required 1st month's rent to be paid in cashier's check, money order, or by credit card. My roommates and I all pay by money order. We received an email from the leasing office a few days ago saying that the place we all received our money order from is now closed and some of the ones issued after May 25th, including ours, may not work. What happens if it doesn't work? Do we get our money back even though the place is closed??
posted by astapasta24 to Work & Money (3 answers total) 1 user marked this as a favorite
 
It is my understanding that money orders are effectively checks for specific dollar amounts that are sold in exchange for cash. The issuer or seller of the money order (say, your local grocery store) accepts the money and prints out the money order. The money you paid--excluding the service fee, which goes to the issuer--is then transferred to the bank*. It's the bank that is responsible for clearing the money order, not the issuer. If you look at your money order, in either the bottom left or top middle, it should say "payable through Second Regional Bank of Astapastaville, N.A." That's the entity that has the funds, and as long as it is still in business--and, even if it isn't, in most circumstances, since banks are handled by the FDIC--your funds should be secure.

* What happens if the money isn't transferred to the bank? I have no earthly idea. However, if it is similar to how credit cards are handled, the selling party (grocery store, etc) keeps a cash reserve account at the bank that's issuing the money orders to cover just such an event.
posted by fireoyster at 1:47 AM on June 11, 2010


I agree with Fireoyster. You should be all set.
posted by Hanuman1960 at 5:18 AM on June 11, 2010


Yep, the store is just a dealer.
posted by randomkeystrike at 9:43 AM on June 11, 2010


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