Money order
Encyclopedia
A money order is a payment
order for a pre-specified amount of money
. Because 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
.
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.
limits domestic postal money orders to US $1,000.00 ) while certified checks are not. Money orders typically consist of two portions: the negotiable check 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.
. 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. Thus, most brokerage firms, insurance firms, and even many banks will not accept them as payment.
As of 2006, there has been a significant increase in counterfeit postal money orders. Often, such a counterfeit will be sent to an unwitting victim who is instructed, on some pretext, to deposit it at his/her bank and return some of the funds. The victim is more likely to trust an “official” money order than a regular cheque, for the reasons given above. However, because money orders are paid through the postal service rather than the usual cheque clearing system, they often take longer to “bounce” than an ordinary cheque. When this finally occurs it is charged back to the victim, who may already have sent back the funds, for which he or she must take the loss. For this reason banks are now applying increased security to incoming money orders, and are becoming more reluctant to accept them. A safer approach is to cash them at a post office. In this case, the authenticity of the item is immediately determined, and if deemed good, the holder is paid and absolved of further responsibility for the funds.
. 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.
, grocery store
s, and convenience store
s. Some financial service companies such as bank
s and credit union
s may not charge for money orders to their clients. Money orders remain a trusted financial instrument. In 2005, 889 million money orders were purchased in the United States for a gross transaction volume of $145 billion. (source: Federal Reserve). 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 (PMOs) are generally regarded as one of the most difficult financial documents to counterfeit.
Money orders were originally issued by the U.S. Postal Service as an alternative to sending cash through the postal system for those who did not have checking accounts. They 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, and Wal-Mart
.
Obtaining a money order in the US is simple, as they can be purchased with any form of money at any post office, and are sold at many other locations.
, 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.
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
(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.
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 offered through the Italian post office. In Ireland, 3V is offered through mobile top-up locations, and in the United States, PaidByCash is offered at 60,000 grocery and convenience stores.
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, Pay-Points and at the Post Office.
Payment
A payment is the transfer of wealth from one party to another. A payment is usually made in exchange for the provision of goods, services or both, or to fulfill a legal obligation....
order for a pre-specified amount of money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
. Because 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
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
.
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. ThePost 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
Postal Order
In the United Kingdom , a Postal Order is used for sending money through the mail. In the United States, this is known as a Postal money order...
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 (for example, the United States Postal ServiceUnited States Postal Service
The United States Postal Service is an independent agency of the United States government responsible for providing postal service in the United States...
limits domestic postal money orders to US $1,000.00 ) while certified checks are not. Money orders typically consist of two portions: the negotiable check 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
Checkwriter
- check writer - The term defined :check writer - The person who physically writes a check or Cheque is called the check writer in some cases. The check writer is also known as the "payor", "signer", "maker", or the "account holder". The signer or presenter of the check, or person who prints and...
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 launderingMoney laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
. Because of provisions within the USA PATRIOT Act
USA PATRIOT Act
The USA PATRIOT Act is an Act of the U.S. Congress that was signed into law by President George W. Bush on October 26, 2001...
and the Bank Secrecy Act
Bank Secrecy Act
The Bank Secrecy Act of 1970 requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering...
, money orders have far more regulatory processing requirements than personal cheques, cashier's cheques, or certified cheques. Thus, most brokerage firms, insurance firms, and even many banks will not accept them as payment.
As of 2006, there has been a significant increase in counterfeit postal money orders. Often, such a counterfeit will be sent to an unwitting victim who is instructed, on some pretext, to deposit it at his/her bank and return some of the funds. The victim is more likely to trust an “official” money order than a regular cheque, for the reasons given above. However, because money orders are paid through the postal service rather than the usual cheque clearing system, they often take longer to “bounce” than an ordinary cheque. When this finally occurs it is charged back to the victim, who may already have sent back the funds, for which he or she must take the loss. For this reason banks are now applying increased security to incoming money orders, and are becoming more reluctant to accept them. A safer approach is to cash them at a post office. In this case, the authenticity of the item is immediately determined, and if deemed good, the holder is paid and absolved of further responsibility for the funds.
India
In India, a money order is a service provided by the Indian Postal ServiceIndian Postal Service
The Department of Posts functioning under the brand name India Post , is a government operated postal system in India; it is generally referred to within India as "the post office"....
. 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 ServiceUnited States Postal Service
The United States Postal Service is an independent agency of the United States government responsible for providing postal service in the United States...
, grocery store
Grocery store
A grocery store is a store that retails food. A grocer, the owner of a grocery store, stocks different kinds of foods from assorted places and cultures, and sells these "groceries" to customers. Large grocery stores that stock products other than food, such as clothing or household items, are...
s, and convenience store
Convenience store
A convenience store, corner store, corner shop, commonly called a bodega in Spanish-speaking areas of the United States, is a small store or shop in a built up area that stocks a range of everyday items such as groceries, toiletries, alcoholic and soft drinks, and may also offer money order and...
s. Some financial service companies such as bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and credit union
Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
s may not charge for money orders to their clients. Money orders remain a trusted financial instrument. In 2005, 889 million money orders were purchased in the United States for a gross transaction volume of $145 billion. (source: Federal Reserve). 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 (PMOs) are generally regarded as one of the most difficult financial documents to counterfeit.
- WatermarkWatermarkA watermark is a recognizable image or pattern in paper that appears as various shades of lightness/darkness when viewed by transmitted light , caused by thickness or density variations in the paper...
s. Telltale watermark when held up to the light should reveal images of Benjamin Franklin, repeated on the left side (top to bottom). - Dark security strip running alongside the watermark (top to bottom), 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 (US) 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.
Money orders were originally issued by the U.S. Postal Service as an alternative to sending cash through the postal system for those who did not have checking accounts. They 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
QuikTrip
QuikTrip is a Tulsa-based chain of convenience stores primarily found in the Midwestern and Southern United States....
, Cumberland Farms
Cumberland Farms
Cumberland Farms is a regional chain of convenience stores based in Framingham, Massachusetts, and operating primarily in the eastern United States and Florida. Cumberland Farms operates roughly 600 retail stores, gas stations, and a support system including petroleum and grocery distribution...
, Safeway
Safeway Inc.
Safeway Inc. , a Fortune 500 company, is North America's second largest supermarket chain after The Kroger Co., with, as of December 2010, 1,694 stores located throughout the western and central United States and western Canada. It also operates some stores in the Mid-Atlantic region of the Eastern...
, Western Union
Western Union
The Western Union Company is a financial services and communications company based in the United States. Its North American headquarters is in Englewood, Colorado. Up until 2006, Western Union was the best-known U.S...
, MoneyGram
MoneyGram
MoneyGram International, Inc. is a US-based, Global Money transfer company, headquartered in Dallas, Texas. It has Global Operations Centers in Saint Louis Park, Minnesota and Brooklyn Center, Minnesota, Global Call Center Operations in Denver, Colorado and regional and local offices around the...
, CVS, and Wal-Mart
Wal-Mart
Wal-Mart Stores, Inc. , branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000...
.
Obtaining a money order in the US 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' (see above) money orders to dupe their victims. By obtaining their "mark's" postal zip codeZIP Code
ZIP codes are a system of postal codes used by the United States Postal Service since 1963. The term ZIP, an acronym for Zone Improvement Plan, is properly written in capital letters and was chosen to suggest that the mail travels more efficiently, and therefore more quickly, when senders use the...
, 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 signatureSignature
A signature is a handwritten depiction of someone's name, nickname, or even a simple "X" that a person writes on documents as a proof of identity and intent. The writer of a signature is a signatory. Similar to a handwritten signature, a signature work describes the work as readily identifying...
and a form of photo identification
Identity document
An identity document is any document which may be used to verify aspects of a person's personal identity. If issued in the form of a small, mostly standard-sized card, it is usually called an identity card...
.
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
Japan Post
was a government-owned corporation in Japan, that existed from 2003–2007, offering postal and package delivery services, banking services, and life insurance. It had over 400,000 employees and ran 24,700 post offices throughout Japan and was the nation's largest employer. One third of all Japanese...
(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.
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/MasterCardMasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
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 offered through the Italian post office. In Ireland, 3V is offered through mobile top-up locations, and in the United States, PaidByCash is offered at 60,000 grocery and convenience stores.
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, Pay-Points and at the Post Office.
See also
- Cashier's checkCashier's checkA cashier's check is a check guaranteed by a bank. They are treated as guaranteed funds and are usually cleared the next day. It is the customer's right to request "next-day availability" when depositing a cashier's check in person...
- Internet fraudInternet fraudInternet fraud refers to the use of Internet services to present fraudulent solicitations to prospective victims, to conduct fraudulent transactions, or to transmit the proceeds of fraud to financial institutions or to others connected with the scheme....
- Money transferMoney transferMoney transfer generally refers to one of the following cashless modes of payment or payment systems:*Wire transfer, an international expedited bank-to-bank funds transfer*Electronic funds transfer, an umbrella term mostly used for bank card-based payments...
(other systems of transferring money) - United States postal notes – a payment system developed out of fractional currency in the US
- Postal OrderPostal OrderIn the United Kingdom , a Postal Order is used for sending money through the mail. In the United States, this is known as a Postal money order...
– similar instrument in the United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...