Money orders

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.

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.

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 Service limits domestic postal money orders to US $1,000.00 as of April 2015^[update]) 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.

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.

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