The Basics of Money Orders

by Investing School on July 30, 2010

Money orders are usually one of the most reliable ways for people to receive payment for goods or services. Because money orders are written for the payment of a specific sum of money – and they are issued and payable at a bank or a post office – there is less of a chance for something to go wrong with the transaction. For example, because the money order is paid for when it is purchased, there is no opportunity for the payment to “bounce” (or be returned for insufficient funds) like there could be with using a personal check for payment.

The post office is usually considered to be the resource through which the government issues money orders, while there are also private issuers of money orders. There are also large companies (like American Express, which began issuing money orders in 1882), for example. In addition, there are also other organizations such as banks, large telecommunications companies, and credit unions that will offer them to customers.

One good thing about a money order is that they are written to the payment of a specific person or organization, making them a safe and convenient method for the payment and receipt of funds. The money order clearly lists both the payee as well as the person who purchased it, who is known as the payor. In addition to being used as a secure payment device in investments, money orders can be used by individuals without a checking account to pay bills, utilities and other outstanding debts of any kind.

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