ACH vs. Money Order: What Is the Difference?

Last updated on March 7th, 2024 at 02:03 pm

When you’re trying to send money to someone, you might be considering an ACH transfer or a money order. An ACH transfer is a direct transfer between bank accounts, while a money order works as a hybrid of cash and a check. Which is best and why? Well, it depends. It’s not truly a question of ACH vs. money order: they actually work quite differently. Here’s how.

ACH vs. Money Order

What Is an ACH Transfer?

An ACH transfer is a direct transfer between bank accounts. ACH stands for Automated Clearing House. The ACH network is a system that banks and other financial institutions use for moving money between accounts at other institutions.

Direct deposits, online bill pay services, and transfers between your accounts at other banks all usually happen via the ACH network.

When you start a transfer or pay a bill, you’re giving both financial institutions instructions to move your money from one to the other using the ACH network. You don’t typically select “ACH,” however—this happens automatically.

What Is a Money Order?

A money order is a piece of paper that works like a combination of cash and a check. You buy a money order for a specific amount and get a piece of paper that looks similar to a check. Unlike a check, the amount on the money order has already been withdrawn from your account.

The order includes who the money is being sent to and who it is from. A money order is similar to cash because the person receiving it knows the funds are guaranteed.

Unlike a check, a money order can’t bounce. You can get money orders from several sources, including the post office and private financial institutions. You usually have to pay for a money order using cash or a debit card.

At locations where you’re allowed to use a credit card to buy a money order, it counts as a cash advance, subject to your credit card’s cash advance fees and interest rate. This could be around three to five percent in fees, and the interest rate may be higher than your normal rate for purchases.

When you buy a money order, the money order provider holds the money in their account until the person receiving the money order cashes it.

ACH vs. Money Order: Transfer Speed

Because an ACH transfer is a digital transaction and a money order is a physical piece of paper, there are some pretty big differences in transfer speed.

ACH transfer speed

With ACH, financial institutions typically group transfers together and send them all at once, three times per business day. It’s similar to how the post office has set pickup and delivery times for letters, instead of picking up each individual letter as soon as it’s placed in the mailbox. It’s normal for ACH transfers to take three or more business days.

Depending on the bank, some ACH transfers can take just a few hours. For a fast transfer between banks that isn’t subject to the delays of an ACH payment, a wire transfer is another potential option.

Money order delivery speed

When you buy a money order, you get it right then and there where you pay for it in cash. However, you need to deliver the physical money order to the person you’re sending money to. This could mean personally handing it to them or sending it by mail.

If you’re sending a money order by mail, you can choose whether to send it as a letter or by express mail. Normal postage rates and mailing times apply. Like with any mail, your money order could get delayed.

ACH vs. Money Order - a phone

ACH vs. Money Order: Costs

ACH transfers and money orders are a service, so you can expect to pay a fee for using them. Postal money orders currently cost $1.45 for money orders up to $500 and $1.95 for money orders up to $1,000. Private services may be slightly more expensive.

ACH transfer costs are set by each bank. Some banks allow free ACH transfers. Other banks charge a transfer fee that’s up to $10 and may vary based on the transfer speed you select.

ACH vs. Money Order: Security

Any time you’re moving money, you want it to get to its destination securely. ACH transfers are secure because they’re direct bank-to-bank transfers which greatly minimizes the risk of the money getting lost or stolen in the middle of the transfer. The main risk of an ACH transfer is not entering the routing number or account number correctly.

Stolen money orders can get a little more complicated. Generally, you can cancel a money order before it gets cashed for any reason. If you think it was stolen, go back to where you brought it, provide your receipt, and you will get a refund minus the fees.

If a fraudster already cashed your money order, you may still be able to get your money back. You are sometimes entitled to a refund if the financial institution that cashed the money order didn’t thoroughly check the identity of the recipient.

The police may also be able to trace who cashed a stolen money order by using the identification they provided or the account the money order was deposited to. You could then get your money back as restitution in the criminal case or by filing a lawsuit against the culprit.

Is an ACH Transfer or Money Order Your Best Option?

ACH transfers and money orders are both popular options that are used in different situations.

ACH transfers are often used for more routine transfers, while money orders are often used when you need to provide someone with guaranteed funds.

Due to financial regulations, neither option is well-suited for international money transfers. To learn more about how to quickly and securely send funds overseas, visit Remitly.