Can You Get a Money Order With a Credit Card?
Explore how credit cards can be used for money orders, understanding the financial implications and alternative payment methods.
A money order is a secure payment method, often used when cash or personal checks are not practical. It functions like a prepaid check, guaranteeing funds because the amount is paid upfront. Credit cards provide revolving credit, allowing cardholders to borrow funds for purchases with repayment plus interest and fees. Many individuals consider whether these two financial instruments can be directly linked.
Using a Credit Card for a Money Order
Directly purchasing a money order with a credit card is not permitted by most vendors and issuers. This is due to fraud prevention and regulatory concerns, as money orders are cash equivalents. They prohibit using credit for such cash transactions to prevent “credit card kiting” or money laundering.
While a direct purchase is not an option, an indirect method exists: obtaining a cash advance from a credit card. This cash can then be used to purchase a money order. This bypasses the direct payment restriction. However, this indirect method involves distinct processes and financial implications.
Understanding Cash Advances
A cash advance is a short-term loan against your credit card’s available credit limit. It provides immediate access to funds, differing from standard purchases. Cardholders can obtain a cash advance by withdrawing money at an ATM with their PIN, visiting a bank branch, or using convenience checks provided by some issuers.
The amount available for a cash advance is a subset of your overall credit limit, with specific caps set by the issuer. Unlike standard purchases, a cash advance adds directly to your credit card balance as a loan that must be repaid. This allows for quick access to funds, but recognize the immediate financial implications.
Associated Costs and Financial Considerations
Cash advances come with high costs. A transaction fee is charged immediately, often 3% to 5% of the amount withdrawn, or a flat minimum fee (e.g., $10). For instance, a $500 cash advance with a 5% fee would incur a $25 charge upfront.
Beyond the initial fee, cash advances carry a higher Annual Percentage Rate (APR) compared to standard purchases. While purchase APRs might average around 20%, cash advance APRs can range from 25% to over 30%. Interest on cash advances begins accruing immediately from the transaction date, without the grace period offered for purchases. Interest accumulates from day one until the balance is fully repaid.
Taking a cash advance can also impact your credit utilization ratio. A high utilization ratio (generally above 30%) can negatively affect your credit score. Minimum payments can cause the high-interest balance to persist, potentially affecting your credit health.
Alternative Methods for Obtaining a Money Order
Several practical alternatives exist for obtaining a money order without high cash advance costs. Using a debit card draws funds directly from a linked checking account, avoiding interest charges and cash advance fees. Paying with physical cash is also a straightforward and cost-effective option.
Money orders can be purchased at various locations. These include:
Post offices
Many banks and credit unions
Retail stores (e.g., grocery stores, convenience stores)
Check-cashing services
For example, the U.S. Postal Service limits domestic money orders to $1,000 and charges a small fee, typically $2.55 for amounts up to $500, and $3.60 for amounts between $500.01 and $1,000. These alternatives offer secure and more economical ways to obtain a money order.