Money Orders - A History and How a Transfer Works


You have probably seen the term 'money order' in many catalogues or online infomercial advertisements. Basically, a money order is like issuing a payment order for money that is noted down in a predetermined amount. It is required that such funds will be prepaid only in the amount specified, so for some people it is a lot safer compared to issuing a personal check to transfer money when they buy something.


Many merchants nowadays like the fact that the money order method comes with extra security benefits thanks to its prepaid nature. Of great relief to them, however, is the fact that since a money order is prepaid there is no chance that it will bounce, which can definitely (and has, many times over, happened) happen to a personal check.


A Surprisingly Long History


People are often surprised to note that the money order system has been around for quite some time. The very first time it was used was back in 1792 in Great Britain. Back then, it was considered as a costly and unsuccessful means to transfer money, so it went through several rounds with many firms until finally, the official Post Office took hold of it and turned it into something successful and profitable in the year 1838. Since then, the fees had been reduced so as to encourage other people to use the system.


How to Use a Money Order

When you buy something, you need to purchase a money order in the exact amount of the thing which you have purchased. You might probably see it as something similar to what is called as a certified check, except that money orders usually have limitations in terms of face value for particular denominations. As of July 2008, for example, the Postal Service of the USA has deemed that domestic money orders will be limited to one thousand dollars each, and no more than that.


A money order usually has two parts. First, you have the negotiable check which is used to remit to the payee. Second, there is a portion there which you rip off as it will serve as a receipt stub for the customer to show proof or records. The amount that you issue in your money order will need to be printed by a machine or what is called a check writer as dictated by you. The amount will be printed on both sides so the recipient and the issuer both have their own records. This is basically for purposes of documentation.


Some Drawbacks

There can also be some drawbacks when it comes to the use of money orders compared to say wire transfers, but these are very few. The most glaring one would be that money orders are not accepted by insurance companies or brokerage firms because of fears of money laundering, they much prefer you to transfer money through an electronic system. However, in other situations where money issued is in smaller forms this is a very safe method which you can be confident in using, especially since the limitation in denomination (which is one thousand dollars) prevents other people from misusing this system.


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