Money order

A money order is a prepaid payment instrument issued by a trusted third-party issuer (commonly a postal operator, a bank, or a regulated money-services provider) after it has received funds from the purchaser.^[1][2] It embodies an instruction to pay a fixed, specified amount to a named payee (and, where issuer rules and local law allow, to a properly endorsed transferee), and it is widely used as a cash-substitute for remittances and person-to-business payments.^[3][4][5] In many legal systems, instruments labeled “money order” may be analyzed under broader categories of paper-based payment orders (e.g., as a form of draft/check in some contexts), meaning the label is not always determinative of its legal nature.^[6][7]

Postal money order, Duchy of Brunswick, 1867

A specimen money order of Italy c. 1879

From a financial-risk perspective, a money order reduces the recipient’s exposure to the purchaser’s account insufficiency because the value is pre-funded at issuance; however, it does not eliminate operational and fraud risks (loss, theft, alteration, counterfeiting), which remain material in real-world use and in issuer verification practices.^[8][9] Finally, in many jurisdictions money orders sit inside compliance frameworks for “monetary instruments” and for entities that issue/sell/redeem them (e.g., money-services regulation and AML obligations), though the precise classification varies by jurisdiction and instrument design.^[10][11]

History

Before the modern Western money order took shape, East Asia and South Asia/Middle East already had functionally similar long-distance remittance mechanisms. In China, feiqian (“flying cash”) is often described as an early paper-based remittance/credit instrument whose core idea was to use verifiable documents to move value across regions without physically transporting metal currency, thereby reducing theft risk and transport costs.^[12][13] Hawala represents a different pathway: a distributed network of brokers enables value transfer at a distance, relying on reputation, recordkeeping, and net settlement rather than formal bank-account transfers; in academic and international-policy research it is commonly discussed under “informal value transfer systems.”^[14][15][16]

The institutionalization of the modern Western money order is commonly traced to 18th-century Britain. Early private schemes (often summarized as beginning in 1762) were followed by expansion after fee reductions in the 1830s; by the 19th century, postal authorities absorbed and standardized the service (often summarized as a takeover around 1838), transforming the money order from a limited-coverage commercial product into a scalable public payment service.^[17][18]

In the United States, authoritative public institutions and research materials commonly date the introduction of postal money orders to 1864, emphasizing the goal of making it safer for the public—especially people far from home—to remit funds through the mail and reduce the risks of sending cash in letters. The Smithsonian’s National Postal Museum highlights 1864 as a major institutional innovation for moving money by mail.^[19][20][21]

During the 20th century, money orders in many countries expanded beyond postal systems to banks and regulated nonbank money-services providers and became more widely distributed through retail channels. Drivers included frequent small-value payment needs associated with mass consumption and urbanization, uneven bank-account access (unbanked/underbanked populations), merchant preference for more controlled payment instruments than personal cheques, and continuous upgrades to anti-fraud controls such as security printing, serial-number verification, and redemption validation.^[22][23][24]

In the 2020s, some digital payment projects have also adopted the term “money order” for blockchain tokens or similar digital instruments. The label typically aims to evoke familiar money-order associations—pre-funding, fixed denomination, verifiability, and transferability For example, in the U.S., the “U.S. Digital Money Order” (USDMO) is described as a blockchain-native payment instrument, and its public materials present it as a “digital money order.”^[25]

Usage

A money order is purchased for the amount desired. In this way it is similar to a cashier's check. The main difference is that money orders are usually limited in maximum face value to some specified figure. For example, as of April 2025^[update] the United States Postal Service limits domestic postal money orders to US$1,000 while cashier's checks do not have a set limit.^[26] 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, money orders have far more regulatory processing requirements than personal cheques, cashier's cheques, or certified cheques.^[27]

National

India

In India, a money order is a service provided by the Indian Postal Service.^[28] 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

An international money order issued in Chicago for encashment in Germany

In the United States, money orders are generally easy to obtain, and are sold at post offices, grocery stores, and convenience stores. Some financial service companies such as banks and credit unions may not^{[clarification needed]} charge for money orders to their clients. Money orders are trusted financial instruments and are considered to be certified funds by the IRS and other Federal Agencies.^[29][30] 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 (USPS) issues money orders for a small charge at any location, but they are only negotiable within the US and its possessions; after September 2024 the USPS stopped issuing international postal money orders.^[31][32]

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 1861–1864.^[33][34] 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,^[35] MoneyGram, CVS, and Wal-Mart.

International

An international money order^[36] 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 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 (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".^[37]

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.^[35] 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^[38][39] 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 orders – similar instruments mainly in British Commonwealth countries
• United States postal notes – a payment system developed out of fractional currency