![Specimen money order of Italy c](https://upload.wikimedia.org/wikipedia/commons/1/19/Specimen_money_order_of_Italy_c._1879.jpg)
A money order is a directive to pay a pre-specified amount of
money
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
from prepaid funds, making it a more trusted method of payment than a
cheque
A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The pers ...
.
History
The money order system was established by a private firm in Great Britain in 1792 and was expensive and not very successful. Around 1836 it was sold to another private firm which lowered the fees, significantly increasing the popularity and usage of the system. The
Post Office
A post office is a public facility and a retailer that provides mail services, such as accepting letters and parcels, providing post office boxes, and selling postage stamps, packaging, and stationery. Post offices may offer additional serv ...
noted the success and profitability, and it took over the system in 1838. Fees were further reduced and usage increased further, making the money order system reasonably profitable. The only draw-back was the need to send an advance to the paying post office before payment could be tendered to the recipient of the order. This drawback was likely the primary incentive for establishment of the Postal Order System on 1 January 1881.
Usage
A money order is purchased for the amount desired. In this way it is similar to a
certified cheque
A certified check (or certified cheque) is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is written. Those funds are then set aside in the bank's ...
. The main difference is that money orders are usually limited in maximum face value to some specified figure (for example, the
United States Postal Service
The United States Postal Service (USPS), also known as the Post Office, U.S. Mail, or Postal Service, is an independent agency of the executive branch of the United States federal government responsible for providing postal service in the U ...
limits domestic postal money orders to US$1,000.00 ) while certified cheques are not. Money orders typically consist of two portions: the negotiable cheque for remittance to the
payee
A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. The party making the p ...
(the receiver), and a receipt or stub that the customer retains for his/her records. The amount is printed by machine or
checkwriter A checkwriter may refer to:
Occupation
A person who physically writes a check or cheque. The check writer is also known as the "payor", "signer", "maker", the drawer, or the "account holder". The signer or presenter of the check, or person who pri ...
on both portions, and similar documentation, either as a third hard copy or in electronic form and retained at the issuer and agent locations.
Drawbacks
Money orders have limited acceptance in the insurance and brokerage industry because of concerns over money laundering. Because of provisions within the
USA PATRIOT Act
The USA PATRIOT Act (commonly known as the Patriot Act) was a landmark Act of Congress, Act of the United States Congress, signed into law by President of the United States, President George W. Bush. The formal name of the statute is the Uniti ...
and the
Bank Secrecy Act
The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law requiring financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laund ...
, money orders have far more regulatory processing requirements than
personal cheques,
cashier's cheque
A cashier's check (or cashier's cheque, cashier's order) is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier. Cashier's checks are treated as guaranteed funds because the bank, rather than the purchaser, is resp ...
s, or
certified cheque
A certified check (or certified cheque) is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is written. Those funds are then set aside in the bank's ...
s.
National
India
In India, a money order is a service provided by the
Indian Postal Service
India Post is a government-operated postal system in India, part of the Department of Post under the Ministry of Communications. Generally known as the Post Office, it is the most widely distributed postal system in the world. Warren Hastings ha ...
. A payer who wants to send money to a payee pays the amount and a small commission at a post office and receives a receipt for the same. The amount is then delivered as cash to the payee after a few days by a postal employee, at the address specified by the payer. A receipt from the payee is collected and delivered back to the payer at his address. This is more reliable and safer than sending cash in the mail.
It is commonly used for transferring funds to a payee who is in a remote, rural area, where banks may not be conveniently accessible or where many people may not use a bank account at all. Money orders are the most economical way of sending money in India for small amounts.
United States
![Money-Order](https://upload.wikimedia.org/wikipedia/commons/5/5b/Money-Order.jpg)
In the United States, money orders are typically sold by third parties such as the
United States Postal Service
The United States Postal Service (USPS), also known as the Post Office, U.S. Mail, or Postal Service, is an independent agency of the executive branch of the United States federal government responsible for providing postal service in the U ...
,
grocery store
A grocery store ( AE), grocery shop ( BE) or simply grocery is a store that primarily retails a general range of food products, which may be fresh or packaged. In everyday U.S. usage, however, "grocery store" is a synonym for supermarket, a ...
s, and
convenience store
A convenience store, convenience shop, corner store or corner shop is a small retail business that stocks a range of everyday items such as coffee, groceries, snack foods, confectionery, soft drinks, ice creams, tobacco products, lottery ticket ...
s. Some financial service companies such as
bank
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Because ...
s and
credit union
A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit organization, nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including depo ...
s may not charge for money orders to their clients. Money orders remain a trusted financial instrument.
However, just because a particular business can issue a money order does not necessarily mean that they will cash them. The
U.S. Postal Service
The United States Postal Service (USPS), also known as the Post Office, U.S. Mail, or Postal Service, is an independent agency of the executive branch of the United States federal government responsible for providing postal service in the U. ...
issues money orders for a small charge at any location.
The United States Postal Service began selling money orders as an alternative to sending currency through the postal system in order to reduce post office robberies, an idea instituted by
Montgomery Blair
Montgomery Blair (May 10, 1813 – July 27, 1883) was an American politician and lawyer from Maryland. He served in the Lincoln administration cabinet as Postmaster-General from 1861 to 1864, during the Civil War. He was the son of Francis Presto ...
who was
Postmaster-General
A Postmaster General, in Anglosphere countries, is the chief executive officer of the postal service of that country, a Ministry (government department), ministerial office responsible for overseeing all other postmasters. The practice of having ...
1861–1864.
Money orders were later offered by many more vendors than just the postal service as a means to pay bills and send money internationally where there were not reliable banking or postal systems. Companies that now offer money orders include
7-11
7-Eleven, Inc., stylized as 7-ELEVE, is a multinational chain of retail convenience stores, headquartered in Dallas, Texas. The chain was founded in 1927 as an ice house storefront in Dallas. It was named Tote'm Stores between 1928 and 1946. A ...
,
QuikTrip
The QuikTrip Corporation, more commonly known as QuikTrip (QT), is an American chain of convenience stores based in Tulsa, Oklahoma that primarily operates in the Midwestern, Southern, and Southeastern United States as well as in Arizona. QuikT ...
,
Cumberland Farms
Cumberland Farms, colloquially known as Cumby's, is a regional chain of convenience stores based in Westborough, Massachusetts, operating primarily in New York, New England and Florida. Cumberland Farms operates 566 retail stores, gas stations, ...
,
Safeway
Safeway is an American supermarket chain founded by Marion Barton Skaggs in April 1915 in American Falls, Idaho. The chain provides grocery items, food and general merchandise and features a variety of specialty departments, such as bakery, d ...
,
Western Union
The Western Union Company is an American multinational financial services company, headquartered in Denver, Colorado.
Founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company in Rochester, New York, the company chang ...
,
[ ]MoneyGram
MoneyGram International, Inc. is an American cross-border Peer-to-peer, P2P payments and electronic funds transfer, money transfer company based in the United States with headquarters in Dallas, Dallas, Texas. It has an operations center in St. L ...
, CVS, Wal-Mart
Walmart Inc. (; formerly Wal-Mart Stores, Inc.) is an American multinational retail corporation that operates a chain of hypermarkets (also called supercenters), discount department stores, and grocery stores from the United States, headquarter ...
, and 3T Solutions.
Obtaining a money order in the United States is simple, as they can be purchased at any post office, and are sold at many other locations.
The US Postal Service's international money orders are accepted in 29 countries.
International
An international money order is very similar in many aspects to a regular money order except that it can be used to make payments abroad. With it, a buyer can easily pay a seller for goods or services if he or she resides in another country. International money orders are often issued by a buyer's bank and bought in the currency that the seller accepts. International money orders are thought to be safer than sending currency through the post because there are various forms of identification required to cash an international money order, often including a signature
A signature (; from la, signare, "to sign") is a handwritten (and often stylized) depiction of someone's name, nickname, or even a simple "X" or other mark that a person writes on documents as a proof of identity and intent. The writer of a ...
and a form of photo identification
Photo identification or photo ID is an identity document that includes a photograph of the holder, usually only their face. The most commonly accepted forms of photo ID are those issued by government authorities, such as driver's licenses, ident ...
.
When purchasing an international money order, it is important to ensure that the specific type of money order is acceptable in the destination country. Several countries are very strict that the money order be on pink and yellow paper and bear the words "international postal money order." In particular, Japan Post
was a Japanese statutory corporation that existed from 2003 to 2007, offering postal and package delivery services, Retail banking, banking services, and life insurance. It's the nation's largest employer, with over 400,000 employees, and run ...
(one of the largest banking institutions in the world) requires these features. Most other countries have taken this as a standard when there is any doubt of a document's authenticity.
Foreign workers often use this method for reliably sending money "home."
Alternatives
In the last decade, a number of electronic alternatives to money orders have emerged and have, in some cases, supplanted money orders as the preferred cash transmission method. Many of these alternatives use the ubiquitous Visa
Visa most commonly refers to:
*Visa Inc., a US multinational financial and payment cards company
** Visa Debit card issued by the above company
** Visa Electron, a debit card
** Visa Plus, an interbank network
*Travel visa, a document that allows ...
/ MasterCard payment systems to settle transactions. In Japan, the konbini
A convenience store, convenience shop, corner store or corner shop is a small retail business that stocks a range of everyday items such as coffee, groceries, snack foods, confectionery, soft drinks, ice creams, tobacco products, lottery ticket ...
system enables cash to cash transfers and is available at many of the thousands of convenience stores located in the country. In Italy, the PostePay system is offered through the Italian post office. In Ireland, 3V is offered through mobile top-up locations. In the United States, PaidByCash is offered at 60,000 grocery and convenience stores. In Bangladesh, mobile banking services enable electronic transfer of money as well as retail transactions.
In the United Kingdom, a number of credit card providers have started to provide pre-paid credit cards. These cards can be "topped-up" at any location that uses the Pay-Point system and also at the Post Office for the Post Office card. PayPal has their own branded pre-paid card which can be "topped-up" using a PayPal account or Pay-Points.
See also
* Electronic funds transfer
Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of b ...
– money transfer (other systems of transferring money)
* Postal order
A postal order or postal note is a type of money order usually intended for sending money through the mail. It is purchased at a post office and is payable at another post office to the named recipient. A fee for the service, known as poundage, ...
s – similar instruments mainly in British Commonwealth
The Commonwealth of Nations, simply referred to as the Commonwealth, is a political association of 56 member states, the vast majority of which are former territories of the British Empire. The chief institutions of the organisation are the Co ...
countries
* United States postal notes – a payment system developed out of fractional currency
References
{{DEFAULTSORT:Money Order
Payment systems
es:Giro postal
ru:Платёжное поручение
sv:Postanvisning
zh:汇票