Whether you need to pay your rent or make a large purchase, a money order is always an option for completing the transaction. Usually, you must use cash or a debit card to buy a money order. But, if you’re in a financial bind, using your credit card is sometimes an option.
However, if you need to buy a money order with a credit card, it can come at a hefty cost. Here’s what you should know about buying a money order with a credit card before you swipe.
What Is a Money Order?
A money order is essentially a pre-paid check. It allows one person to securely transfer funds to another person.
When you send a money order, you must purchase the total amount upfront and specify the person or business receiving the funds. This way, the value is guaranteed to the exact person you intend to receive the money. In other words, the payment won’t bounce since the money is already accounted for.
When the person receiving the fund picks up the money order, they must show a valid ID to prove their identity and verify the name of the person sending the money order. Requiring this information ensures the money gets into the hand of the correct recipient. Also, it makes it less likely that a thief could take the funds. However, if they do, money orders have receipts so you can track the whereabouts of the funds and potentially recover the money.
How to Use Money Orders
When paying bills or making large purchases, folks that don’t have checking accounts can use money orders as an alternative to checks or debit cards. For instance, some people may use a money order to pay rent. In some cases, payees may require you to use a money order as your form of payment.
Since checks have all of your information written on them, some people are wary of fraud when using checks. Using a money order may offer peace of mind from knowing their information is not being exposed to fraudsters.
Another use for a money order is to send funds internationally to a friend or family member. Because many money order sellers have locations across the globe, you can usually send funds to plenty of locations worldwide. But, if you choose to send a money order internationally, make sure the person or payee is close to a location where they can receive the funds.
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Pros and Cons of Money Orders
There are both pros and cons to money orders. It’s important to weigh both sides when deciding whether a money order is the right solution for you.
Money orders can come in handy for a variety of reasons. Specifically, their upsides include:
• Offers a secure form of payment: If you send a money order through the mail, it doesn’t provide your private banking details the way a personal check would. Also, not just anyone can take a money order to the bank and cash it like they could if you sent cash through the mail. Further, money orders are more secure than carrying around a large sum of cash, which could be lifted.
• Provides a form of payment for people who don’t have a bank account: For those who don’t have access to a checking account, a money order can help them pay bills or complete other transactions. In some cases, payees may require a money order or cashier’s check to guarantee payment. For example, you may use a money order when selling your car to a private party.
• Has recovery options if lost or stolen: Because money orders are traceable, there are processes to recover them if they are lost or stolen. However, depending on the situation, you may have to pay an extra fee to recover the lost or stolen funds. Still, that’s usually better than losing all of your money.
While money orders have benefits, they also come with some downsides, including:
• Lack of convenience: Unlike other purchases, you must buy a money order in person. So, if you’re in a time crunch, a money order might not be a viable solution. Also, there are limits for the amount you can send via money order. For example, the USPS and most banks limit money order purchases to $1,000. But, you can purchase additional money orders if you need more than the maximum amount. Remember, though, that you will have to pay a fee for each money order you buy.
• High cost: No matter how you decide to purchase a money order, you must pay a fee. If you get a money order from the bank or the USPS, you can expect to pay about $0.50 to $2 per money order. If you get one from your credit card company, you can expect to pay a fee of about 5% or $10, whichever is greater. So, if you take out a $1,000 money order, you could pay $50 just for the transaction. Also, you’ll likely have to pay a higher APR for the money order total, even if you have a good APR for a credit card.
• Common scam practice: In some cases, a criminal will send a fraudulent money order for a large sum of money and then request a portion of the proceeds. Before you realize you’ve been duped, the excess funds may have already been deposited in the thief’s checking account.
Can You Buy a Money Order With a Credit Card?
So, can you buy a money order with a credit card? Well, possibly. Some major credit issuers will allow you to buy a money order with your credit card. However, the credit issuers may not treat the money order as they would a usual purchase. Instead, the issuer may treat it as a cash advance, which involves a higher than normal APR.
Recommended: How to Send Money Using a Credit Card
Should You Buy a Money Order With a Credit Card? And How to Do It
Should you buy a money order with a credit card? Well, it depends on your situation. But, before you buy a money order from your credit issuer, it’s wise to understand the drawbacks that come with purchasing a money order from a credit card.
• High cost: As mentioned, you will usually spend 5% or $10 per money order (whichever is greater) depending on the credit card issuer. So, for a $500 money order, you’ll likely pay close to $25. Also, you may have to pay the “cash advance APR,” which is usually higher than your normal purchase APR on a credit card.
• No grace period: With everyday purchases, you usually have a grace period before interest accrues — an essential part of how credit cards work. This usually isn’t the case with cash advances, however. Interest will typically begin accruing right away, meaning your outstanding balance will grow immediately.
• No rewards: Unlike everyday purchases, you won’t receive any bonus points or cash back rewards when you take a cash advance.
• Potential to become a big financial burden: Credit card issuers determine how they allocate your minimum credit card payment. So, let’s say your outstanding balance includes purchases and a cash advance. If your minimum credit card payments are first allocated to purchases, only making the minimum payment may make it almost impossible to repay your total bill since your interest is constantly accruing on the cash advance portion.
After careful consideration, you may decide that buying a money order from a credit card is the most viable option. To do so, you can request a cash advance from your credit issuer. You also can get a cash advance at your local ATM, bank branch, or a loan agency like Cashngo Loans. Make sure you have your PIN if you decide to use a loan agency.
Your credit issuer may also let you use a convenience cheque, which is an option that transfers money from your credit card to your checking account. Essentially, it works similarly to a regular check, except the funds come from your line of credit instead of your bank account.
Once you have the funds from your cash advance, you can go ahead and purchase a money order at an establishment that offers them.
Where Can You Buy a Money Order With a Credit Card?
In the past, companies such as Western Union and 7-Eleven used to let you purchase a money order with a credit card. Now, no company lets you purchase a money order directly with a credit card — even if it’s somewhere that generally accepts credit card payments.
However, Western Union gives you the option to transfer money with a credit card. This means that you can send money through the Western Union app online or in person. Before you send money through Western Union, make sure to check to see if there are other fees associated with this transaction.
You can also get a money order by using your cash advance to purchase one from several establishments such as:
• The USPS
• Select banks, such as Wells Fargo
• Check-cashing stores
• Payday loan locations
• Retailers or grocery stores
Keep in mind that in addition to the fees for the cash advance, you will have to pay the fee for the money order.
What Are the Costs of Getting a Money Order With a Credit Card?
With a cash advance, you usually have to pay a higher rate than the average credit card interest rate on the amount you take out, which will begin accruing right away. Also, your card issuer may apply extra fees, usually 5% of the total amount or $10, whichever is the more significant amount.
You will also have to pay the money order fee since no establishment directly accepts a credit card payment for a money order.
Looking for a new credit card?
Before using your credit card to buy a money order, assess the total cost involved. It’s also wise to explore other options, such as asking if the payee would accept a credit card payment or take a personal loan. Personal loans have an average interest rate of about 6.59% (for folks with excellent credit), which might be significantly less than the interest rate on a cash advance.
SoFi credit cards have identity theft protection and no foreign transactions fees. For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.
Can you buy a money order with a credit card at Walmart?
No, you can’t directly purchase a money order from Walmart with a credit card. Instead, you must purchase a Walmart money order with cash or a debit card. However, you can take a cash advance from your credit card company and use the proceeds to purchase a money order.
Can buying money orders with a credit card raise your credit utilization?
Since taking a cash advance requires you to use your line of credit, it will increase your credit utilization rate. Keep in mind if your credit utilization ratio exceeds 30%, your credit score might be affected.
Does paying the minimum balance count toward a cash advance every month?
Not necessarily. Every credit issuer determines how to distribute your minimum monthly payment. Therefore, your credit issuer may choose to put your minimum payment amount toward new purchases before putting funds toward repaying the cash advance. Doing such may make it more challenging to repay your outstanding balance.
How can you get cash from your credit card?
Yes, you can get cash from a credit card by requesting a cash advance through an ATM, bank branch, or convenience cheque. However, credit issuers may apply a fee and a higher APR for the cash advance.
Photo credit: iStock/sturti
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