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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: m ...
from prepaid funds, making it a more trusted method of payment than a
cheque A cheque (or check in American English) is a document that orders a bank, building society, 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 person writing ...
.


History

Systems similar to modern money orders can be traced back centuries. Paper documents known as " flying cash" were used in China from the 800s, while the
Hawala Hawala or hewala ( , meaning ''transfer'' or sometimes ''trust''), originating in India as havala (), also known as in Persian, and or in Somali, is a popular and informal value transfer system based on the performance and honour of a hug ...
practice of informal financial remittances through a widespread system of brokers can be traced to India in the 1300s and remains common in parts of Asia and Africa. The modern western money order system was established by a private firm in Great Britain in 1762, though due to high costs was 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 letter (message), letters and parcel (package), parcels, providing post office boxes, and selling postage stamps, packaging, and stationery. Post o ...
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
cashier's check A cashier's check (or cashier's cheque, cashier's order, official check; in Canada, the term ''bank draft'' is used, not to be confused with Banker%27s draft as used in the United States) is a check guaranteed by a bank, drawn on the bank's own f ...
. 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 simply the Postal Service, is an independent agencies of the United States government, independent agency of the executive branch of the federal governmen ...
limits domestic postal money orders to US$1,000 while cashier's checks do not have a set limit. Money orders typically consist of two portions: the negotiable check for remittance to the payee (the receiver), and a receipt or stub that the customer retains for record. The amount is printed by machine or checkwriter 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 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 laun ...
, money orders have far more regulatory processing requirements than personal cheques, cashier's cheques, or certified cheques.


National


India

In India, a money order is a service provided by the Indian Postal Service. 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 their 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

In the United States, money orders are generally easy to obtain, and are sold at
post offices Post, POST, or posting may refer to: Postal services * Mail, the postal system, especially in Commonwealth of Nations countries ** An Post, the Irish national postal service ** Canada Post, Canadian postal service ** Deutsche Post, German posta ...
,
grocery store A grocery store ( AE), grocery shop or grocer's shop ( BE) or simply grocery is a retail store that primarily retails a general range of food products, which may be fresh or packaged. In everyday US usage, however, "grocery store" is a synon ...
s, and
convenience store A convenience store, convenience shop, bakkal, bodega, corner store, corner shop, superette or mini-mart is a small retail store that stocks a range of everyday items such as convenience food, groceries, beverages, tobacco products, lotter ...
s. Some financial service companies such as
bank A bank is a financial institution that accepts Deposit account, 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 m ...
s and
credit union A credit union is a member-owned nonprofit organization, nonprofit cooperative financial institution. They may offer financial services equivalent to those of commercial banks, such as share accounts (savings accounts), share draft accounts (che ...
s may not charge for money orders to their clients. Money orders are trusted financial instrument and are considered to be
certified funds Certified funds are a form of payment that is guaranteed to clear or settle by a bank or other financial institution certifying the funds. The term is most commonly used in North America in the context of real estate transactions. When making certa ...
by the
IRS The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...
and other Federal Agencies. However, just because a particular business can issue a money order does not necessarily mean that they will cash them. The
United States Postal Service The United States Postal Service (USPS), also known as the Post Office, U.S. Mail, or simply the Postal Service, is an independent agencies of the United States government, independent agency of the executive branch of the federal governmen ...
(USPS) issues money orders for a small charge at any location, however they are only negotiable within the US and its possessions; after September 2024 the USPS stopped issuing international postal money orders. The USPS 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 who was
Postmaster-General A Postmaster General, in Anglosphere countries, is the chief executive officer of the postal service of that country, a ministerial office responsible for overseeing all other postmasters. History The practice of having a government officia ...
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, QuikTrip, Cumberland Farms, Safeway,
Western Union The Western Union Company is an American multinational financial services corporation headquartered in Denver, Denver, Colorado. Founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company in Rochester, New York, the co ...
,
MoneyGram MoneyGram International, Inc. is an American interstate and international peer-to-peer payments and electronic funds transfer, money transfer company headquartered in Dallas, Dallas, Texas. It has an operations center in St. Louis Park, Minnesota, ...
, CVS, and
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 in the United States and 23 other ...
.


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 they reside 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 , "to sign") is a 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. Signatures are often, but not always, Handwriting, handwritt ...
and a form of photo identification. 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 is the nation's largest employer, with over 400,000 employees, and ru ...
(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/ MasterCard payment systems to settle transactions. In Japan, the
konbini A convenience store, convenience shop, bakkal, bodega, corner store, corner shop, superette or mini-mart is a small retail store that stocks a range of everyday items such as convenience food, groceries, beverages, tobacco products, lottery t ...
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

*
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 to the named recipient at another post office. A fee for the service, known as poundage, ...
s – similar instruments mainly in
British Commonwealth The Commonwealth of Nations, often referred to as the British Commonwealth or simply the Commonwealth, is an international association of 56 member states, the vast majority of which are former territories of the British Empire The B ...
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