Money order
From Wikipedia, the free encyclopedia
A money order is a payment order for a pre-specified amount of money. It is a more trusted method of payment than a personal check, because it is required that the funds be prepaid for the amount shown on it. Merchants (who may have no recourse in the event that a regular bank check may bounce) may welcome the extra security that being paid with a money order may offer.
Contents |
[edit] Using money orders
A money order is purchased for the amount desired. In this way it is similar to a certified check. The main difference is that money orders are usually limited in face value to some specified figure (for example, $1,000 for U.S. Postal money orders as of February 2007) while certified checks are not. Money orders typically consist of two portions: the negotiable check for remittance to the creditor, and a receipt the customer retains for his records. The amount is imprinted by machine or checkwriter on both portions, and similar documentation, either as a third hard copy or in electronic form, is retained at the issuer and agent locations.
[edit] Drawbacks of money orders
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 check, for the reasons given above. However, because money orders are paid through the postal service rather than the usual check clearing system, they often take longer to "bounce" than an ordinary check. 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.
Another caveat to the oft-purported safety benefit of mailing money orders is that if they are damaged in the mail, they may literally become worthless. This is because when trying to redeem the money order (whether by the recipient, or by the original purchaser―if it was damaged enough to be returned to the sender), some institutions will not cash it, nor issue a new one, if the routing number on the bottom of the money order can not be read by their processing machine (as might happen with a torn or water damaged money order), commonly even if a receipt is present. When this happens, a claim must usually be filed with the issuing bank or institution. Unfortunately, most of the institutions that issue money orders charge a "non-refundable service fee," which is sometimes greater than the value of the money order itself―especially for lower denomination money orders (the service fee[1] for filing a claim with MoneyGram, for example, is $12). The claim then generally takes 30 to 60 days to be processed, and it may be rejected. Sending cash in the mail, on the other hand, while still generally discouraged, would at least offer a greater chance at redeeming the entire value of the amount sent should damage occur (unless the envelope or package is known to be carrying cash and is stolen), since most banks will exchange damaged bank notes so long as the bill is at least more than fifty percent intact [2].
[edit] Money orders in the U.S.
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 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).
[edit] Security features of U.S. postal money orders (PMO)
- PMOs 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 (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.
- Postal Money Orders are NEVER sequentially numbered, which is common with counterfeits.
[edit] Example of counterfeiting
Also note that money orders are also available from businesses other than the U.S. Postal Service. Chain retail stores such as 7-11, Cumberland Farms, Western Union, and Wal-Mart also offer these money devices.
Due to the increased public awareness of fraudulent US Postal Money Orders, counterfeiters are using these other types of money orders to dupe their victims. By obtaining their "mark's" postal zip code, they will draft bogus money orders based on which ever franchises will most likely be in their victims home area as the familiarity of the store's name offers a sense of security.
[edit] Money orders in 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. [3]
[edit] 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 in order 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. In particular, several countries are very strict that the money order be on pink paper and include the words "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.
[edit] 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. 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. Many of these alternatives use the ubiquitous Visa/MasterCard payment systems to settle transactions. In Italy the PostePay system offered through the Italian post office. In Ireland, 3V (payment solution) is offered through mobile top-up locations, and in the United States, PaidByCash is offered at 60,000 grocery and convenience stores.
[edit] See also
- Cashier's check
- Internet Fraud
- Postal Order - similar instrument in the United Kingdom
