FX International Payments
By Elena Malykhina
Using money orders internationally instead of other payment methods offers several benefits.2 One of them is convenience: a bank account is not required to purchase a money order. They can be purchased with cash, debit card or travelers’ checks. Further, the sum of a money order is paid in advance, so it won’t bounce as a personal check might. The name of the recipient and the name of a financial institution that issued the money order usually appears on the document, making it difficult to steal a money order. But if an international money order is lost or stolen, it can be cancelled or re-issued. And money orders are traceable; each money order issued is accompanied by a receipt with the date of purchase, the amount of money, and a banking code that can be used for tracing purposes.
International money orders, meanwhile, are accepted in numerous countries around the world and can be converted to local currency.3 In addition to banks and credit unions, international money orders can be purchased at any Post Office location. The USPS has agreements with 27 foreign countries to accept and cash their money orders in the U.S.; in turn, those countries accept USPS international paper money orders issued to recipients in their countries.4 Other than Japan, most are countries in North and South America, including Canada, Bahamas, Bolivia, Belize, Jamaica and Peru.
All of these factors make international money orders an option to consider for smaller businesses. It’s important to note that the process of a company cashing a money order differs slightly from personal money orders. If a financial institution is unfamiliar with a company receiving the funds, be prepared to present both personal identification and proof of employment at the company.5
As the market moves to electronic forms of payment, alternatives to paper money orders – like online money transfers – are growing in popularity. The USPS report notes that its sales of international paper money orders declined from $60 million in 2010 to $34 million in 2015, while at the same time the overall international money transfer market grew between 3 percent and 11 percent annually.6 The USPS also has experienced large declines in domestic money order sales. The shift represents a strong demand for electronic money transfer services, which can provide funds instantaneously compared to money orders.
The USPS report found that wire transfers are increasingly being used to make international payments. Although it costs more to send small amounts of money through a wire transfer than a money order, it’s considered to be a very secure payment method (despite recent reports of wire transfer fraud). Wire transfers use a central clearing body and can be made among most existing financial institutions that manage large capital flows on a global scale.7
Another downside of international money orders is that they have a relatively low maximum limit – often $1,000 per money order and even lower for international money orders; the USPS’ international money order limit is only $700. It’s possible to purchase multiple money orders up to a maximum of $10,000, but that also means paying multiple fees – approximately $4 per international money order.8 With wire transfers, restrictions on the monetary amount or frequency could still apply depending on whether it’s a business or an individual. However, those limits are typically much higher than they are for money orders. A maximum limit for wire transfers could be as high as $50,000 per day for individuals or $200,000 per day for businesses.9
Another non-electronic alternative is a cashier’s check, which is similar to a money order but is strictly provided by a bank or a credit union. Cashier’s checks have higher amount limits than money orders and, therefore, can be used for larger transactions.
Though sales of international money orders have dropped in the past several years as demand for electronic money transfers rises, they remain a convenient and secure method of sending funds internationally – for as long as they are available.
Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.
1. International Paper Money Order Service Audit Report, USPS Office of the Inspector General; https://www.uspsoig.gov/sites/default/files/document-library-files/2016/FT-AR-16-007.pdf.
2. "3 Advantages of Money Orders Vs. Cash You Might Not Know", Yellow Pages CA; http://www.yellowpages.ca/tips/what-are-money-orders-and-how-do-they-work.
3. "Money Order Basics", The Balance; https://www.thebalance.com/money-order-basics-315432
4. "International Money Orders", USPS; https://www.usps.com/international/money-transfers.htm
5. "How to Cash Money Orders in a Business Name", StudioD; http://smallbusiness.chron.com/cash-money-orders-business-name-73173.html
6. International Paper Money Order Service Audit Report, USPS Office of the Inspector General; https://www.uspsoig.gov/sites/default/files/document-library-files/2016/FT-AR-16-007.pdf
7. "Money Order Basics", The Balance, 16 September 2016; https://www.thebalance.com/money-order-basics-315432
8. "Sending Money Abroad: International Money Transfer", Foreignborn, accessed 19 October 2016; http://www.foreignborn.com/self-help/sending_money_abroad.htm
9. "USD Transfers", TransferWise, accessed 20 October 2016; https://transferwise.com/help/article/1667423/us-dollar-transfers/usd-transfers