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I manage rental properties and have noticed a trend among various tenants with a history of paying late or bad credit: They often pay rent using money orders. They do this even though I also accept regular checks (I have never required a cashier's check) or even cash. (And yes, most of them have checking accounts.) This has happened with several unrelated tenants at different properties; the only thing they have had in common is a history of credit problems.

So, is there a reason why people with shaky finances use money orders? My only theory is that they're bad at managing money and know that by putting it in a money order, they prevent themselves from being able to spend it before I come to collect the rent.

  • How do you know they have a checking account? – mhoran_psprep Jan 22 at 11:03
  • Many pay day lenders, like AmScott, offer free money orders. Having such a money order could indicate a problem. Also, they many not understand the abstract concept of a checking account. Just because your balance is X, does not mean that is available to you if you wrote checks. – Pete B. Jan 22 at 11:45
  • @mhoran_psprep because they occasionally pay with checks and/or because I find out about their checking accounts when I do a background check prior to leasing to them. Admittedly, I don't know for sure that they continue to have checking accounts; it's possible they were closed. – painter48179 Jan 22 at 12:53
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There are a number of reasons for money order usage.

It's more common among low income earners. In some cases, they have a history of bad financial behavior (bounced checks, credit card abuse, etc.). Landlords often require money orders to protect themselves.

Most people have bank accounts with more than modest assets in them or direct deposit and their bank fees are waived. Some people are 'unbanked'. They don't have an account at a bank or other financial institution and therefore it's pay as you go with money orders.

There are lots of poor people who can't afford the big bank fees. Money orders are often cheaper than cashier's checks as well as bank wire fees.

Some people get paid in cash and try to live off of the radar so that the IRS doesn't chase them or their Medicaid doesn't get cancelled. Or perhaps they have a court judgments against them.

Due to experiences in their native countries of origin, immigrants are less likely to have US bank accounts.

  • The "unbanked" part of this answer doesn't seem pertinent to the question asked, because OP said "most of them have checking accounts". It's about why someone with shaky finances who does have a checking account wouldn't use it to pay rent. – nanoman Jan 24 at 6:35
  • I think that it's clear that my Answer was a big picture reply as to why people use money orders. I would think that the OP and readers could figure out what applies to his circumstances. – Bob Baerker Jan 24 at 12:52
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Credit problems can make it difficult to get a checking account. But you say most of the problem tenants do have one.

Your theory is possible. Or perhaps they receive their income in cash (or on a prepaid card), and find the money order more secure/documented than paying rent in cash directly, and simpler/more private than the two-step process of depositing the cash and then writing a check.

Also, some landlords require tenants to start paying by money order or cashier's check if they have had late or returned check payments. Although you don't require this, it may be a habit of theirs from previous residences.

It might be interesting to find out how you know they have checking accounts, and what they do use checks for.

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You believe they have checking accounts. I'll answer based on that assumption.

They value their relationship with you highly enough (and would like to not risk a late fee or worse, eviction) that they are paying you in a guaranteed way. This is to protect their own self-interest. It just happens to be in your interest as well.

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