Can You Purchase a Money Order With a Credit Card?
Explore the realities of using credit cards for money orders, their financial consequences, and discover safer payment options.
Money orders serve as a secure and reliable payment method, similar to a prepaid check. They offer a way to send a specific amount of money to a recipient, often preferred when cash is not advisable or a personal check might not be trusted. Unlike personal checks, money orders are prepaid, ensuring the funds are guaranteed and cannot “bounce.” This characteristic makes them a useful tool for various transactions, from paying bills to sending money safely through the mail.
Credit Card Acceptance for Money Orders
Most major vendors do not accept credit cards for money order purchases. Places like the U.S. Postal Service, Walmart, and Western Union typically require payment in cash or with a debit card. This policy exists to prevent consumers from taking a cash advance on their credit card without incurring the associated fees and interest. Financial institutions and money order providers consider such a transaction to be a cash equivalent, which circumvents the intended use of a credit card for purchases of goods and services.
Even in rare instances where a credit card might be processed for a money order, the transaction is almost universally classified as a cash advance by the credit card issuer, not a standard purchase. This classification means the transaction bypasses the typical grace period for purchases and immediately incurs additional costs. This treatment is intended to deter individuals from using credit cards to obtain cash, which carries higher risks and costs for both the cardholder and the issuer.
Understanding Cash Advance Implications
When a credit card transaction is categorized as a cash advance, several financial implications arise. First, cash advances incur a transaction fee, which can be a flat amount or a percentage of the advanced sum. This fee often ranges from 3% to 5% of the amount, or a minimum of $5 to $10. For example, a $200 cash advance with a 5% fee would result in an immediate $10 charge.
Second, the interest rate (Annual Percentage Rate or APR) for cash advances is usually higher than the APR for standard purchases. While purchase APRs might be in the mid-to-high teens, cash advance APRs can sometimes be several percentage points higher, potentially reaching 25-30% or more. This higher rate makes borrowing through a cash advance more expensive.
Finally, interest on a cash advance begins accruing immediately from the transaction date. Unlike regular credit card purchases, which often have a grace period before interest is charged if the full balance is paid on time, cash advances offer no such grace period. This means that even if you pay off the cash advance within a few days, you will still be responsible for the accrued interest from day one, along with the transaction fee.
Other Payment Options for Money Orders
Several financially sensible payment methods are available for purchasing money orders. Cash is universally accepted for money order purchases, providing a straightforward and immediate transaction. This option avoids any additional fees or interest charges associated with credit products.
Debit cards are another common and convenient payment method for money orders. When using a debit card, the funds are directly withdrawn from your checking account, similar to a cash payment, ensuring you are using your own money and not incurring debt. This method offers the security of not carrying large amounts of cash while still providing a direct payment.
In some cases, particularly at banks or credit unions, you may be able to use funds directly from your bank account to purchase a money order. This involves a direct transfer of funds, much like a debit card transaction, guaranteeing the payment. These alternative methods are preferred because they avoid the high costs and immediate interest accrual associated with credit card cash advances, making them a more economical choice for securing a money order.