A money order is a payment order for a pre-specified amount of money.
As it is required that the funds be prepaid for the amount shown on it, it is a more trusted
method of payment than a cheque.
History of money orders
The money order system was established by a private firm in Great Britain in 1792, and
was expensive and not very successful.
In approximately 1836, it was sold to another private firm which lowered the fees, which
therefore significantly increased the popularity and usage of the system.
The Post Office 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.
Using money orders A money order is purchased for the amount
desired.
In this way it is similar to a certified cheque.
The main difference is that money orders are usually limited in maximum face value to some
specified figure while certified cheques are not.
Money orders typically consist of two portions: the negotiable cheque for remittance to the
payee, and a receipt or stub that the customer retains for his/her records.
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 of money orders 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, money orders
have far more regulatory processing requirements than personal cheques, cashier's cheques,
or certified cheques.
The US Postal Service's money orders are accepted in 29 countries; however, only their international
money orders are accepted abroad.
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Money orders around the world 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 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
In the United States, money orders are typically sold by third parties such as the United States
Postal Service, grocery stores, and convenience stores.
Some financial service companies such as banks and credit unions 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 issues money orders for a small charge at any location.
Postal Money Orders are generally regarded as one of the most difficult financial documents
to counterfeit.
Watermarks.
Telltale watermark when held up to the light should reveal images of Benjamin Franklin,
repeated on the left side.
Dark security strip running alongside the watermark, just to the right.
If held to the light, a microfiber strip will show tiny letters "USPS" along its length,
facing backward and forward.
Rainbow of inked patterns and tones.
PMOs are printed on crisp, clean, textured paper stock.
Maximum value of $1000 for domestic postal money orders, and $700 for International Postal
Money Orders.
Denominations appear in two locations.
If the denomination amounts are discolored, that indicates that they have been erased.
Ultraviolet features include the above mentioned micro-fiber strip that glows red, and the
PMO number on the reverse side and the bottom which will also appear red under UV light.
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 Postmaster-General Montgomery Blair.
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, MoneyGram, CVS, Wal-Mart, and 3T Solutions.
Obtaining a money order in the United States is simple, as they can be purchased with any
form of money at any post office, and are sold at many other locations.
Counterfeiting Due to the increased public awareness of fraudulent
US Postal Money Orders, counterfeiters are using these US Postal and other companies'
money orders to dupe their victims.
By obtaining their "mark's" postal zip code, they will draft bogus money orders based on
whichever franchises will most likely be in their victim's home area as the familiarity
of the store's name offers a sense of security.
Furthermore, money orders are subject to erasing the name and writing in somebody else's name.
Money order fraud is specifically not reimbursed by Western Union and the victim is required
to go through local police to attempt to recover lost funds.
In response, the perpetrator who cashed the money order can simply claim "identity theft"
to the investigating detective.
Money orders for this purpose can be obtained from places like rent drop boxes.
International money orders 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 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, the Japan Post requires these features.
Most other countries have taken this as a standard when there is any doubt of a document's
authenticity.
Alternatives to money orders 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 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.
Bitcoins are a possible alternative, essentially being a very fast money order.
See also Cashier's check
Internet fraud Money transfer
United States postal notes – a payment system developed out of fractional currency
in the US Postal Order – similar instrument in the
United Kingdom References