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How Does a Postal Order Work?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedAug 20212 min read

If you’re of a certain age, you may remember the days when it was normal to receive postal orders as a Christmas gift or on your birthday. Perhaps you even used them to pay for something from a catalogue. Those who don’t remember them may be wondering what is a postal order, and how does a postal order work? We’ll cover these questions and more below.

What is a postal order?

Although many of us have transitioned away from paper and toward mobile or contactless payments instead, postal orders are still a perfectly valid form of payment. They may not be as popular as they once were, but postal orders can still be purchased at the Post Office.

Postal orders were a very common payment method before the 1960s, when many individuals didn’t have their own bank accounts. This means that they couldn’t write paper cheques to pay for big-ticket items like utility bills, wages, and rent. Rather than pay for everything in cash, postal orders presented a safe alternative. Although not accepted everywhere, you can use a postal order payment for mail orders and certain government items such as a driving licence.

You can only make a postal order payment for transactions up to £250. Like cheques, they’re issued on slips of paper but don’t include any sensitive financial details like bank account numbers. There are two types to choose from:

Crossed postal orders can be used to pay bills or to deposit directly into your bank account.
Uncrossed postal orders are exchangeable for cash at any Post Office counter.

How does a postal order work?

A postal order is comparable to a cheque in many ways, but the major difference is that it’s not tied to any bank account. Another key difference is that you’ll pay a fee to the Post Office to use this service, which tends to make a postal order payment more costly than simply writing a cheque. Here is the current breakdown of fees:

Value between 50p and £4.99 – 50p
Value between £5 and £9.99 – £1
Value between £10 and £99.99 – 12.5% of the postal order’s face value
Value between £100 and £250 – Fee is capped at £12.50

We’ve already mentioned the two types of postal orders above, including crossed and uncrossed. If you want to pay for something with a crossed postal order, you’ll specify the recipient’s name which means they’ll be the only one that can accept it. Uncrossed postal orders don’t need a name and can be cashed at the Post Office. Each postal order will have its own unique number, which is displayed at the bottom of the slip to keep track of the transaction.

How to cash a postal order?

What can you do if you’ve received a gift or payment in this format? Unfortunately, you can’t cash a postal order online. Whether it’s crossed or uncrossed, you’ll need to sign the back of the paper like you would with a cheque. You’ll also need to pay the associated fee. This can be paid separately or deduced from the total value of your postal order. It’s always a good idea to bring your ID along as well, although this isn’t required with an uncrossed postal order. You must also cash in your order within six months of it being sent, or the money will be lost by both the sender and recipient.

What to do when postal orders are lost or stolen

You can’t buy or sell a postal order online, which means that there’s a slightly higher chance that this piece of paper could be lost at some point along the way. If you suspect your order has been lost, you’ll need to wait for 15 days after posting it and then visit your local Post Office branch to request a P58 form. This must be sent to Royal Mail along with your proof of purchase. This shows the ID number to track the postal order.

For stolen postal orders, you’ll need to report the incident to the police to obtain a Crime Reference Number. The police provide the number to the Post Office, and then you’ll need to follow up to obtain your refund.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.