Can You Pay for a Money Order With a Credit Card?
Understand the financial reasons credit cards can't purchase money orders and find practical solutions for sending funds.
Money orders serve as a reliable payment method for individuals without bank accounts or those seeking a secure alternative to personal checks. Credit cards provide a flexible means of payment and access to a revolving line of credit. Many wonder if credit cards can be used to purchase money orders. This article explores why these financial tools are generally incompatible for direct use and outlines alternative methods for transferring funds.
Understanding Money Orders and Credit Cards
A money order is a prepaid, guaranteed form of payment, similar to a certified check, issued by a third party. It offers a secure way to send money when cash or personal checks are not suitable. Money orders are typically purchased at post offices, banks, and various retail stores. The purchaser pays the full amount upfront, ensuring funds are available when the recipient cashes the money order.
A credit card is a line of credit from a financial institution, allowing borrowing up to a limit for purchases. The transaction amount is added to the cardholder’s balance, which must be repaid. Interest charges apply if the balance is not paid in full by the due date.
Why Credit Cards Cannot Be Used for Money Orders
Most vendors and credit card issuers do not permit purchasing money orders with a credit card. Credit card companies typically treat money order purchases as cash advances. A cash advance is borrowing cash from your credit line, not a standard purchase. This distinction has significant financial implications for the cardholder.
Cash advances come with higher fees and interest rates than regular credit card purchases. Issuers commonly charge a cash advance fee, often 3% to 5% of the transaction, or a flat minimum fee like $10, whichever is greater. The interest rate for cash advances is usually higher than for purchases, often approaching 30% or more. Interest accrues immediately, even if the balance is paid in full by the next statement cycle.
Credit card companies implement these policies to mitigate risk and prevent “credit card kiting,” where individuals use credit to obtain cash without sufficient funds. Merchants also refuse credit cards for money orders to avoid facilitating costly cash advances and prevent fraud. This restriction helps protect cardholders from high fees and the financial system from misuse.
Alternatives for Sending Funds
Several alternative methods are available for sending money without using a credit card for a money order. Peer-to-peer (P2P) payment applications, such as PayPal, Venmo, and Cash App, allow users to send money digitally. While these services often permit linking a credit card, a transaction fee, typically around 3%, usually applies when sending funds this way. Funds usually arrive quickly, sometimes instantly, though transferring to a bank account may incur fees or take a few business days.
Wire transfers through services like Western Union or MoneyGram also offer a way to send funds. Some may allow credit card funding, but these are often processed as cash advances, leading to the same fees and immediate interest charges. Domestic wire transfer fees range from $0 to $35; international transfers can cost up to $65. For those with bank accounts, direct bank transfers or online bill pay services provide secure and often lower-cost options.