Money Order Pros and Cons

A money order is a non-interest bearing financial instrument that is usually issued by a bank, a post office, or certain businesses such as Western Union or MoneyGram. A money order allows the person named to receive a specific amount of money on demand from the issuing bank or postal service. Money orders can be sent overseas and are sometimes used as a means of transferring funds across international borders.

Secure Payments

A money order can be used to pay for anything that you might normally pay for with cash, a cashier's check, or a personal check. For many years, postal money orders and money orders issued by well-known financial institutions have been considered yet another “gold standard” for safe payments.

“Postal money orders are as secure, if not more so, than any other financial instrument,” according to the U.S. Postal Inspection Service, the law enforcement arm of the United States Postal System. “Genuine postal money orders contain design features that maximize their security.”

The key word in that news release is genuine. Yet again, counterfeiters have struck at the heart of a once secure payment method.

Money Order Scams

In recent years, sophisticated counterfeiters have learned how to create high-quality fake money orders, including U.S. Postal Service money orders, and they have used the bogus instruments in scams that have victimized many online auction sellers. One scam involves sending a fake money order to pay the seller for the auction item and its shipping. In a more brazen version, the seller receives a money order that exceeds the total for the winning bid and shipping. The “buyer” insists an honest mistake has occurred, and asks the seller to refund the “difference.” Unsuspecting sellers have sent the money and paid dearly for a crime that also cost them the value of the merchandise and shipping.

Postal inspectors seized more than 3,700 counterfeit postal money orders, representing potential losses of millions of dollars, in the final three months of 2004, and they were expecting even larger seizures during 2005. According to the U.S. Postal Service, skilled criminals in Eastern Europe and West Africa printed many of the bogus money orders.

Don't be surprised if you encounter an increasing number of online auction sellers who refuse to accept money orders, including “secure” U.S. postal money orders. Publications from the U.S. Post Office show merchants and auction sellers how to spot bogus postal money orders. But using these tips requires time, effort, and attention to detail. A harried seller who earns her living from online auctions may simply prefer to avoid dealing with money orders.

Similarly, money orders also can eat up a buyer's time. First, you have to go to a financial institution or post office to buy one. Then you have to mail it or use a delivery service such as UPS, Federal Express, or DHL. If you become a frequent buyer in online auctions, this process can consume too much time and expense.

Western Union

In spite of the counterfeit money order crisis, Western Union money orders are popular instruments for fast payment in the online auction world. Western Union has been in the money transfer business for more than 150 years and has more than 212,000 agent locations in nearly 200 countries. Western Union operates BidPay.com, an online site specifically tailored for making fast auction payments.

When an auction is over, the winning bidder can visit www.bidpay.com and enter the auction details and payment information. Western Union then sends payment to the seller either by mailing a Western Union-branded money order or, if the seller is located in the United States, by sending a payment directly to the seller's U.S. checking account.

Unfortunately, once a money order is sent, there is no way to cancel it. As the buyer, you will need to confirm the seller's legitimacy before completing the transaction.

MoneyGram

A MoneyGram is another convenient way to send money quickly to someone you know in about 170 countries. But, as MoneyGram concedes on its Web site, “its ability to protect you is limited and … you are much better situated to protect yourself.” In other words, if you send a MoneyGram to a stranger you only “know” through an online auction site, good luck.

Even eBay recommends not doing business with auction sellers who insist on receiving payments only through “instant money transfer services such as Western Union and MoneyGram that send cash instantly from storefront locations, by telephone and over the Internet.” They could take the money and run — and never ship the auction item you thought you won.

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