Can You Buy a Money Order with a Credit Card? Is it a good choice?

Can You Buy a Money Order with a Credit Card? Is it a good choice?

Can You Buy a Money Order with a Credit Card? A money order is a safe way to send money through the mail or to make payments to companies that have limited payment options. But, if all you have is a credit card, you’re probably wondering whether you can even use it to buy a money order.

Can You Buy a Money Order with a Credit Card? Is it a good choice?

What Is a Money Order?

A money order is an alternative to checks or cash when you need to make a secure payment and can’t or don’t want to use your bank’s online payment options or an online payment app such as Venmo or PayPal.

You must pay for a money order upfront. Unlike a check, which can bounce, this makes it a guaranteed payment to the recipient and is why some people and businesses prefer to use them.

Money orders must be made out to a specific person or business and can only be cashed by that recipient. Because cashing a money order requires presenting ID in person, you typically don’t have to worry that a thief will get their hands on your funds.

How Money Orders Work

Money orders are similar to cash, only more secure because they designate a specific payee. Since they must be paid upfront, they can’t bounce like a personal check and are therefore a form of guaranteed payment. They also don’t splash your checking account number across the front, which makes them less prone to identity theft.

Money orders are widely available at retail stores and post offices and usually cost less than $2. They’re a solid way to send money in the mail or pay your landlord — but only if you use cash or a debit card.

The Advantages of Money Orders

Money orders have certain advantages over cash and checks, which has helped them remain on the scene. Money orders differ from cash, checks, or both in four other important ways:

  • Nearly universal acceptance. Money orders are paid for at the time of purchase and—unlike personal checks—the funds are guaranteed.
  • No overdraft concerns. With money orders, there’s no account to overdraw.
  • Cash at a distance. Money orders can be paid for in one place and issued in another. This makes them a very convenient way to send someone funds on short notice—such as your son or daughter who’s traveling or away at school and has an urgent need for cash.
  • No bank account required. Roughly 9 million U.S. households didn’t have a bank account as of 2015, according to the Federal Deposit Insurance Corp., so they can’t write personal checks or use a digital payment service like Zelle.

Money Order Disadvantages

Money orders have certain disadvantages as well:

  • Value limit. Most banks set a limit of $1,000 per money order, so they are not well-suited for larger transactions.
  • Fees. Banks and other providers typically charge a small fee to write a money order, usually ranging from $1 to $5.
  • Require a payment guarantee. In general, issuers will only accept a guaranteed form of payment, such as cash—and that’s the rub when it comes to buying a money order with a credit card.

Can You Buy a Money Order With a Credit Card?

Can You Buy a Money Order With a Credit Card?

Because they’re basically like cash, buying a money order with a credit card means your purchase will be coded as a cash advance. So the answer is yes, some merchants may allow you to buy a cash advance with a credit card, but it can be expensive. Cash advance fees usually clock in at 5% or $10 — whichever is greater. So, on a $100 money order, you’d pay $10, and on a $500 money order, you’d pay $25.

That’s not all, though. Here are several other things to keep in mind when you purchase a money order with a credit card:

  • You’ll pay a higher interest rate: Most credit cards have a “cash advance APR” that’s higher than the normal purchase APR.
  • There’s no grace period: Unlike most credit card purchases, cash advances start accruing interest immediately. That means you’ll likely owe more money in fees each day after the day of the cash advance until you’ve paid it off.
  • You won’t earn rewards: Cash advances don’t earn points, and won’t help you meet a minimum spend or snag a free vacation.
  • It might be tough to pay off: When you make the minimum payment on your credit card, your card issuer chooses where to allocate it — and it’ll probably be to your lowest-interest debt. So if you’re already carrying a regular purchase balance on a particular card, the minimum payments won’t help you pay down your cash advance (and in the meantime, it’ll accrue significant interest). Any amount paid over the minimum, however, usually goes to the highest APR — which would likely be your cash advance.

Alternatives to Money Orders

Most people purchase money orders when they don’t have a bank account, want to keep their checking account numbers private or want to avoid sending cash through the mail. In each of these situations, however, a money order isn’t the only option.

Here are a few alternatives:

  • Pay bills or rent with a credit cardTry Plastiq, an online service that lets you pay any bill with a credit card for a 2.5% fee.
  • Send money domestically: Use online platforms like Venmo or PayPal, both of which allow you to fund your transfer with a credit card for around 3%. Or, if you have the money in your checking account, use your bank’s bill pay service.
  • Send money internationally: If your recipient doesn’t have access to the American platforms, you can use Revolut or TransferWise (fees depend on the type of currency, but are generally lower than money orders).
  • Pay a stranger for a large purchase: Say you bought a new car on Craigslist. If you’re afraid of giving the seller a check or cashier’s check with your information on it, you could pay through one of the online platforms above. Or you could purchase a money order with your debit card. (If you don’t have the money in your bank account, then maybe think about whether you really need that item after all!)

Bottom line

Bottom line

Although it’s possible to buy a money order with a credit card, it’s almost never a good idea because of the extra fees and interest charges you’ll accrue.

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