Can You Buy a Money Order With a Credit Card?

A money order serves as a secure, prepaid payment method, functioning much like a personal check but with guaranteed funds. This financial instrument provides a reliable way to send money or make payments without requiring a traditional bank account. Individuals often use money orders for various purposes, including paying rent, utility bills, or sending funds securely to others. Using a credit card to purchase a money order involves specific financial classifications and associated costs.

General Rules for Money Order Purchases

Most money order issuers, such as the U.S. Postal Service, Walmart, MoneyGram, and Western Union, do not accept credit cards for purchases. Instead, they require payment through cash or debit cards. This restriction stems from a money order’s nature as a guaranteed form of payment. Issuers aim to prevent fraud and avoid credit card processing fees. Accepting cash or debit cards ensures funds are immediately available and confirmed, reducing risk for the issuer.

Credit Card Transaction Classification

When a credit card is used for transactions that are not standard retail purchases, especially for items considered cash equivalents, the credit card issuer classifies it as a “cash advance.” A cash advance is a short-term loan from your credit card’s available credit, distinct from a regular purchase. Unlike typical purchases that might have an interest-free grace period, interest on a cash advance begins accruing immediately from the transaction date. Money orders, along with other transactions like peer-to-peer transfers, loan payments, or foreign currency exchanges, are viewed by credit card companies as cash equivalents. Therefore, if a credit card transaction for a money order were permitted, it would be processed under cash advance terms.

Costs and Implications of Using a Credit Card

Processing a money order purchase as a cash advance carries notable financial consequences. Credit card companies impose an immediate cash advance fee, often a percentage of the transaction amount, ranging from 3% to 5%, or a flat fee such as $10, whichever amount is greater. Beyond this upfront fee, interest accrues instantly on the advanced amount, without any grace period that might apply to standard purchases. The annual percentage rate (APR) for cash advances is also higher than the APR for regular credit card purchases. A cash advance can impact an individual’s credit utilization ratio, potentially affecting their credit score, and these transactions do not earn credit card rewards.

Alternative Payment Methods for Money Orders

To purchase a money order, several payment methods avoid the complications and costs associated with credit cards. Cash is accepted at money order issuing locations, offering the most straightforward payment option. Debit cards are also accepted, as they draw funds directly from a linked bank account, providing a secure and convenient alternative to cash. Personal checks may be accepted, though this is less common due to the issuer’s need for guaranteed funds. Individuals can also withdraw cash from their bank account or an ATM using their debit card, and then use that cash to purchase the money order, thereby bypassing any cash advance fees or interest.