Can Money Orders Be Paid With a Credit Card?
Understand if credit cards can be used for money orders and the financial impact of such transactions.
Money orders serve as a secure payment method, offering a reliable way to send money, particularly when direct bank transfers are not feasible or the recipient lacks a bank account. Funds are guaranteed because the amount is paid upfront by the purchaser, eliminating concerns about insufficient funds. This makes them a trusted option for payments requiring guaranteed funds.
Accepted Payment Methods for Money Orders
When purchasing a money order, cash and debit cards are the most widely accepted payment methods. These are accepted at various locations that issue money orders, including post offices, retail stores, and financial institutions. The requirement for immediate, guaranteed funds often dictates that sellers accept only these secure payment types.
Conversely, credit cards are generally not accepted for direct money order purchases at most common retail and institutional locations. This policy exists because money orders represent a cash equivalent, and accepting credit cards would allow individuals to obtain cash on credit. While rare exceptions might exist through specific third-party agents or online services, these are uncommon and often come with distinct terms.
Credit Card Treatment for Money Order Purchases
When a credit card is used for a transaction that closely resembles a cash equivalent, such as purchasing a money order, the credit card issuer typically processes it as a “cash advance” rather than a standard purchase. A cash advance means borrowing cash directly against your credit limit, differing significantly from using your credit card to buy goods or services.
Credit card companies classify money order purchases this way to prevent “credit card cycling,” where individuals use credit to obtain cash, bypassing typical fees and interest associated with cash advances. Even if a vendor accepts a credit card for a money order, the financial institution recognizes it as a cash advance, akin to withdrawing cash.
Costs Associated with Cash Advances
If a money order purchase is treated as a cash advance, several financial implications arise. Cash advances incur immediate fees, which are either a percentage of the transaction amount or a flat minimum fee, whichever is greater. These fees commonly range from 3% to 5% of the advanced amount, often with a minimum charge of $10. For example, a $100 money order could incur a $10 cash advance fee.
Interest on cash advances begins accruing immediately from the transaction date, without the grace period offered for standard credit card purchases. The annual percentage rate (APR) for cash advances is also frequently higher than for regular purchases, sometimes reaching 30% or more. Consulting your credit card agreement for specific cash advance terms, including fees and interest rates, is advisable to understand the full financial impact.