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Credit card networks provide the financial infrastructure for transactions, while credit card issuers are responsible for providing cards to consumers and managing their accounts. To put it another way, credit card networks facilitate transactions between merchants and credit card issuers, and credit card issuers pay for transactions on the cardholder’s behalf when they use their card.

Once you understand this difference, however, you may be confused by the fact that some credit card networks are also card issuers. To get a better understanding, keep reading for a closer look at the differences between a credit card network vs. issuer.

What Is a Credit Card Network?

Credit card networks create the digital infrastructure so merchants can facilitate transactions between themselves and the credit card issuers — meaning they’re key to how credit cards work. In order to facilitate these transactions, the credit card networks charge the merchants an interchange fee, also known as a swipe fee.

Here’s an example of how this works:

•   Say someone walks into a clothing store and uses their credit card to buy a pair of pants. They swipe or tap their credit card to make the purchase.

•   The store’s payment system will send the details of this transaction to the cardholder’s credit card network, which then relays the information to the credit card issuer.

•   The credit card issuer decides whether or not to approve the transaction.

•   The clothing store is alerted as to whether or not the transition was approved.

Essentially, credit card networks make it possible for businesses to accept credit cards as a form of payment, making them integral to what a credit card is. Credit card networks are also responsible for determining where certain credit cards are accepted, as not every merchant may accept all networks.

The Four Major Card Networks

The four major credit card networks that consumers are most likely to come across are:

•   American Express

•   Discover

•   Mastercard

•   Visa

All of these credit card networks have created their own digital infrastructure to facilitate transactions between credit card issuers and merchants. These four credit card networks are so commonly used that it’s possible to find a business almost anywhere in the U.S. that accepts one or more of the payment methods supported by these merchants.

When traveling and using a credit card internationally, it’s more common to come across Visa and Mastercard networks.

Now, for the detail mentioned above that can cause confusion: Two of these popular payment networks — American Express and Discover — are also credit card issuers. However, their offerings as a credit card network are separate from their credit card offerings as an issuer.

Does It Matter Which Card Network You Use?

Which credit card network someone can use depends on the type of credit card they have and whether the credit card network that supports that card is available via the merchant they are purchasing from. Most merchants in the U.S. work with all of the major networks who support the most popular credit cards, so it shouldn’t matter too much which credit card network you have when shopping domestically. When traveling abroad, however, it’s important to have cash on hand in case the credit card network options are more limited.

Merchants are the ones who are more likely to be affected by the credit card networks that they use. This is due to the fact that credit card networks determine how much the merchant will pay in processing fees in order to use their system.

Recommended: Charge Cards Advantages and Disadvantages

What Are Credit Card Issuers?

Credit card issuers are the financial institutions that create and manage credit cards. They’re responsible for approving applicants, determining cardholder rewards and fees, and setting credit limits and the APR on a credit card.

Essentially, credit card issuers manage the entire experience of using a credit card. Cardholders work with their credit card issuer when they need to get a new card after losing one, when they have to make their credit card minimum payment, or when they want to check their current card balance.

Credit card issuers can be banks, credit unions, fintech companies, or other types of financial institutions. Some of the biggest credit card issuers in the U.S. are:

•   American Express

•   Bank of America

•   Barclays

•   Capital One

•   Chase

•   Citi

•   Discover

•   Synchrony Bank

•   U.S. Bank

•   Wells Fargo

Credit Card Network vs Issuer: What Is the Difference?

Credit card issuers and credit card payment networks are easy to confuse. The main difference, as noted, is as follows:

•   Credit card networks facilitate payments between merchants and credit cards.

•   Credit card issuers create and manage credit cards for consumers. If you have an issue with your credit card — like in the instance you want to dispute a credit card charge or request a credit card chargeback — it’s the issuer you’d go to.

These are the main differences to be aware of when it comes to credit card networks vs. issuers, provided in chart form:

Credit Card Issuer	Credit Card Payment Network
•   Creates credit cards •   Manages credit cards •   Accepts or declines applicants •   Sets credit card fees •   Determines interest rates and credit limits •   Creates rewards offerings •   Approves and declines transactions	•   Processes transactions between credit card companies and merchants •   Creates the digital infrastructure that facilitates these transactions •   Charges an interchange fee to merchants •   Determines which credit cards can be used at which merchants

How Credit Card Networks and Issuers Work Together

Credit card networks and issuers need each other to function. Without a credit card network, consumers wouldn’t be able to use their card to shop with any merchants, and the credit card issuer’s product would go unused. Credit card networks create the infrastructure that allows merchants to accept credit cards as payment.

However, it’s up to the credit card issuers to approve or decline the transaction. The credit card issuer is also the one responsible for getting credit cards into consumers’ hands when they’re eligible and old enough to get a credit card, thus creating a need for the credit card networks’ services.

Recommended: When Are Credit Card Payments Due

The Takeaway

A credit card network provides the financial infrastructure for cards and facilitates the transaction between the issuer and the merchant. The issuer is responsible for creating, offering, and managing consumers’ accounts. A couple of businesses are both credit card networks and issuers. Understanding the fine points of how credit cards operate can be an important part of your financial literacy and using credit responsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is a credit card network?

A credit card network is the party that creates the necessary infrastructure to process transactions between a credit card issuer and a merchant. In return for processing the transaction, the merchant pays the credit card network an interchange fee, which is how the credit card networks make money.

How do I know my credit card issuer?

To find out a credit card’s issuer, simply look at your credit card. There will be a string of numbers on the credit card, and the first six to eight digits represent the Bank Identification Number (BIN) or the Issuer Identification Number (IIN). The Issuer Identification Number identifies who the credit card issuer is.

Who is the largest credit card issuer?

The four largest credit card networks are American Express, Discover, Mastercard, and Visa. Most merchants in the U.S. work with all four credit card networks. When traveling abroad, it’s more common to come across Visa and Mastercard networks.

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Photo credit: iStock/Poike

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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In a nutshell, a credit card balance is the amount of money you owe to a credit card company from month to month. This is an important number to keep track of because if you don’t pay off your balance by the end of the billing cycle, you’ll owe interest. And, as you may know, credit cards usually have a high interest rate, which can lead to credit card debt.

That said, when you go to manage your credit card bill, you might get tripped up on the difference between your statement balance and your current balance. Read on to learn more about what each type of credit card balance is, how you can check yours, and whether carrying a balance affects your credit score.

What Is a Credit Card Balance?

A credit card balance is the amount of money you owe to your credit card company, as well as interest and any fees.

When you look at your credit card bill, you may see two balances posted: your current balance and your statement balance.

•   Your statement balance is the amount of money you owe from the previous billing cycle.

•   Your current balance, on the other hand, is how much you owe at this moment in time. This amount could be higher or lower than your statement balance, depending on whether you’ve paid your credit card bill, charged more items to your credit card, or requested a credit card chargeback.

But when your billing cycle closes with a balance, what does that mean? It depends on your card issuer. Many card issuers have a grace period between when the credit card billing cycle closes and when payment is due. That means, if you pay your statement balance in full when payment is due, you will not accrue interest on any of the charges billed from the previous cycle.

Recommended: Pros and Cons of a Charge Card

How Is a Credit Card Balance Calculated?

What does your credit card balance mean? It’s more than just whatever you’ve purchased during the previous month. A credit balance also consists of:

•   Any accrued interest

•   Late payment fees

•   Foreign transaction fees

•   Annual fees

•   Cash advances

•   Transfer fees

•   Any statement credits

•   Any payments made to the account

If you carry a balance, you’ll have to pay interest on the balance owed. The only exception is if you have a card with a 0% annual percentage rate, or APR, which is the interest rate charged when you carry a balance on your card. (This 0% might be a promotional or introductory rate, for example.)

But generally, your card will have a grace period, during which interest will not accrue on the balance.

Differences Between My Credit Card Balance and Statement Balance

The meaning of your credit card balance can vary depending on whether you’re discussing your statement balance or current balance.

•   Your statement balance is how much you owe at the end of the billing cycle.

•   Your current balance is a continuous tally of any credit card activity.

Here are some points to know about this:

•   You will have a due date by which you’ll need to pay your statement balance.

•   When your statement balance is paid, there may be activity on your balance as you continue to use your credit card throughout the month.

•   The charges made after your statement balance is available will show up on your next statement balance.

•   These charges, as well as any remaining amount from your statement balance, constitute your current balance.

Here’s the information on this topic in chart form:

Statement Balance	Current Balance
The amount of money you owe at the end of the billing cycle	The amount of money you owe on the card right now
Remains the same until the end of the next billing cycle	Updates every time you use your credit card
The amount you need to pay off to avoid interest charges	The total amount currently owed on your credit card

Your Credit Card Balance and How It Affects Your Credit Score

Some people believe that carrying a balance may benefit their credit score, but that’s not true. Credit card companies do like to see credit card usage, but paying your balance in full is what can help your credit score.

One of the largest determinants of your credit score is your credit utilization ratio. This is the amount of money you’ve borrowed across credit cards compared to the amount of credit you have available. If you had a card with a credit card limit of $10,000 and you charged $3,000 on the card, for instance, your credit utilization ratio would be 30%.

In general, the lower your credit utilization ratio, the more helpful it is in building your score. It’s recommended to keep your credit utilization below 30%, though 10% is ideal. By paying off as much of your credit card balance as you can in a statement period, you’ll lower the amount of money you owe, thus decreasing your credit utilization ratio. This can be part of using a credit card responsibly.

How to Check Your Credit Card Balance

There are many ways to check your credit card balance. You can do so online, over the phone, through an app, or simply keep an eye out for monthly statements, which may be mailed to you or securely delivered through email.

Online

An easy way to check your credit card account balance is to go online to your card issuer’s website, where you can set up your online account. You can then log onto this account to check your balance, pay any bills, and otherwise perform any account maintenance.

As with any sensitive information, make sure you keep your user information secure.

Recommended: When Are Credit Card Payments Due

Over the Phone

Your credit card company likely has a number that you can call to learn your balance, often from an automated voice that reads it off to you. It can also be helpful to know the number to your credit card company in case you want to dispute a credit card charge you don’t recognize or have questions about fees or anything else that appears on your statement, or have lost your card.

Through an App

Most credit card companies have an app in which you can check your credit card balance. The app also may offer additional features, such as a breakdown of spending and your most recent credit score.

Through Regular User Notifications

Depending on how you’ve set up your account, you may receive user notifications and statement balance updates through text message, email, or the mail, or a combination of all three.

Should You Carry a Credit Card Balance?

In general, carrying a credit card balance has the potential to hurt your finances and your credit score.

Sometimes, however, carrying a credit card balance can happen. Perhaps you had a big dental bill or had to buy a new refrigerator. Or maybe you used your card to pay for plane tickets for next summer’s vacation.

Here are some ways to potentially minimize the negative effects of carrying a balance if you end up in a situation where you need to do so:

•   Look for a card with low APR. The lower the APR, the less interest you’ll pay on purchases. A good APR is one that’s below the current average, though what’s considered competitive can also vary depending on the type of the card and the individual’s credit score and history.

•   Pay more than the minimum balance due. Even if you can’t pay the full balance, paying as much as you can above the credit card minimum payment will help keep your credit utilization ratio low. It will also minimize the amount of interest you’ll pay over time.

•   Make a budget. Look through your expenses and find ways to pay down the card over a set amount of time. (There are a variety of budgeting methods available; try a couple and see what works best for you.) Some cards may offer the option to pay off certain purchases in installments, at a different interest rate than the overall card.

•   Treat your credit card as you would cash. If you don’t have the money right now, don’t whip out your card. Using a debit card instead can help you stay within the bounds of your available funds.

The Takeaway

A credit card can be a powerful tool — but carrying a balance can make it harder to achieve financial goals. Keeping track of your current balance and making a plan to pay off your statement balance in full each month can be helpful. Doing so can allow you to make the most of your credit card and minimize credit card debt, which can be important money moves.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What does a negative balance mean on a credit card?

A negative balance means the card company owes you money. This might occur due to a statement credit, a return, or you overpaying your bill. A negative balance won’t affect your credit score. When you make a charge on your credit card, the negative balance will be used to cover the payment.

Is it good to carry a balance on a credit card?

No. While it is good to use a credit card regularly and pay it off on time as a means of building your credit history, carrying a balance won’t help your credit score. In fact, if you rack up too much of a balance that it increases your credit utilization ratio, it could hurt your credit score.

What happens if you cancel a credit card with a balance?

If you cancel a credit card with a balance, you’ll still be responsible for payments, interest, and card fees. There may be downsides to canceling the card, too. That’s because part of your credit score rests on how long you’ve had open accounts.

Can I transfer my credit card balance to another card?

Yes. This is called a balance transfer. In a balance transfer, you’ll put your current balance on a new credit card. This can save you money on interest if you’re moving your balance to a lower-interest card. However, be aware that there are balance transfer fees involved. Also, a balance transfer may affect your credit utilization ratio.

Can I make partial monthly payments instead of settling the entire balance?

You can. Paying more than the minimum each month can minimize the effect of interest and lower your credit utilization ratio. To avoid interest entirely, however, you’ll want to pay off your statement balance in full each month.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Photo credit: iStock/Roman Novitskii
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It may be tempting to just make only the minimum payment on your credit card bill and put off paying the total amount until another time. However, only making your credit card minimum payment can cost you both in interest and your credit score. Plus, it can keep you in debt longer.

To avoid this predicament, here’s what you need to know about minimum credit card payments, as well as what you can do if making the minimum payment on your credit card is a challenge.

What Is a Credit Card Minimum Payment?

A credit card minimum payment is the lowest sum that you’re required to pay each credit card billing cycle. To avoid late fees or penalties, you must pay at least this amount.

If you don’t make the minimum payment amount, you could be charged a fee or, worse, your interest rate could increase, which is why it’s critical to understand this part of how credit cards work.

Creditors determine your minimum payment by using one of three different methods, which include:

•   A flat percentage of your total outstanding balance: Your minimum payment might be 1% to 3% of your balance. Thus, your minimum credit card payment will fluctuate monthly depending on your credit card balance at the time.

•   A percentage of your balance plus fees or interest that’s applied during that billing cycle: With this method, the credit card company may make your minimum payment equal to 1% of your revolving balance and then add any fees or the annual percentage rate (APR) charged within that billing cycle.

•   A flat rate: A creditor may apply a flat rate, perhaps $25 or $35, for your minimum payment.

Keep in mind that if your revolving balance is less than the minimum payment, your creditor will typically require you to pay the total amount. Because minimum credit card payment guidelines differ from creditor to creditor, you’ll want to get familiar with your credit card payment rules — ideally before you even apply for a credit card.

How Does a Minimum Payment Affect Your Credit Score?

Not only does paying the minimum payment on your credit card increase the amount you pay in interest, but it can also impact your credit score.

One of the factors that credit bureaus use to determine your credit score is your credit utilization ratio, which is the percentage of credit you’re using versus the amount you have available. A good rule of thumb is to keep your credit utilization ratio below 30% (better still, closer to 10%) so your credit won’t be affected.

For example, let’s suppose you have $15,000 of available credit. If your revolving credit card balance is $7,500 racked up from places that accept credit card payments. That means your credit utilization ratio is 50%, which exceeds the 30% threshold. If you’re only making the minimum credit card payments, your credit utilization ratio will stay beyond an acceptable rate for a more extended amount of time. Therefore, your credit score may dip.

To avoid this scenario, it’s wise to make more than the monthly minimum payment so you keep your credit utilization low. This is especially important if you have a limit that’s below the average credit card limit, as it will be easier for your credit utilization ratio to jump.

What to Do If You Cannot Afford Your Minimum Payment

Although you want to make more than your minimum credit card payment each month, you may find yourself in a situation where you can’t afford to do so. Fortunately, there are steps you can take to ease this financial burden.

Stop Using Your Credit Card

If you’re trying to repay your credit card debt, it’s best not to add to it. This means that while you’re working to pay down your credit card balance, you should consider putting your credit card use on pause. If you continue to use your credit cards, you may feel like you’re never getting ahead. This can become a vicious debt cycle that can be challenging to break.

You can pause your use by putting your credit cards in a safe place where you don’t have access to them but also don’t risk them getting stolen. For example, you could put them in your family’s safe. This way, you can avoid the temptation of impulse buys.

Also, you may find it helpful to track your spending. This will allow you to see where your money is going and get a better handle on what costs might be busting your budget.

Reduce the Cost of Your Bills

Looking for ways to cut your expenses can free up extra cash to help you make your credit card minimum payments. You might start by saving on streaming services you’re not using, or consider putting a gym membership on hold until your credit card balance is repaid.

For example, if you have cable, Netflix, Amazon Prime, and Hulu, you may want to choose just one or two of these services to keep. Then, you can cancel the other subscriptions that you don’t need, saving you money and making it easier to meet your minimum payment on your credit card.

Consider Getting a Side Job to Earn Extra Income

Increasing the amount of money you have coming in also can help you accelerate your credit card debt repayment. Even bringing home an extra couple hundred dollars per month via a low-cost side hustle could help you make a significant dent in your credit card debt.

For example, if you’re handy, you could sign up for a service like TaskRabbit to help people tackle projects around their homes. Or, if you like to interact with a variety of people, you could consider driving for a ride-share service like Uber or Lyft.

Also, if you receive a financial windfall (say, extra money from a work bonus, tax refund, or a gift), you could put these funds to good use by making a larger credit card payment.

Call The Credit Card Company

In some cases, you may want to contact your credit card company if you cannot make the credit card minimum payment. You’ll want to explain why you can’t make the minimum payment and how much you can afford to pay.

Also, share with your credit card company when you can begin making regular payments again. Your credit card company would rather receive payment than no payment. So, by communicating with them, they might be willing to work with you while you repay your debt.

Explore Get-Out-Of-Debt Options

There are other options to help you get out of your credit card debt. For starters, debt consolidation is a get-out-of-debt strategy that can help you minimize your interest payments, helping you to repay your debt faster. With debt consolidation, you take out a loan with a fixed interest rate that you use to repay all of your other high-interest debts. Ideally, you want to find a financing option that can yield a lower interest rate.

How Paying Only the Credit Card Minimum Payment Costs You More

As you now know, it’s essential to make at least the credit card minimum payment. But making only the minimum payments each month can end up costing you more — even if you have a good APR for a credit card. When you carry a monthly credit card balance, the interest continues to accrue, which can keep you in a debt cycle.

To illustrate the cost of paying the minimum payment on the credit card only, let’s suppose your credit card has a 17% interest rate and you have a $3,000 revolving balance. If your credit card company has a $50 minimum payment requirement, it will take you 135 months to repay your debt. Additionally, you’ll end up paying roughly $3,743 in interest alone. This means you’ll spend a total of close to $7,000 to pay off a $3,000 bill.

Luckily, you don’t have to do all of this math yourself if you’re wondering how your credit card payments will impact the total amount you owe. Per the Credit CARD Act of 2009, credit card companies are required to put a minimum balance warning on each bill you receive to protect your interests.

Usually, credit card companies will communicate this warning with a table that provides a snapshot of the amount of time it will take to repay your balance if you only make the minimum payment. In some cases, the company may also provide a table that suggests the amount of time it will take to repay your debt if you make more than the minimum payment.

The Takeaway

If you want to avoid costly interest or a dip in your credit score, it’s wise to make more than your credit card minimum payment each month. An even better solution (if you can afford to do so) is to pay off your total credit card balance every month. This way, you can dodge high interest payments and keep your credit utilization ratio at a favorable rate.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What are your minimum payment rights?

As part of the Credit Card Accountability Responsibility and Disclosure (CARD) Act, creditors are legally required to illustrate how long it will take you to repay your debt if you make only the minimum payment. Also, they must provide a toll-free number that cardholders can call to get assistance with credit counseling or debt management. These requirements are designed to keep credit practices fair.

Does paying minimum due affect your credit score?

Yes, making a minimum payment can affect your credit score since it impacts your credit utilization ratio, a factor used to calculate your credit score. Credit utilization ratio is the percentage of credit you’ve used versus the amount you have available. So, if you continue to carry a high balance on your credit card, your credit utilization rate may be higher than recommended, which can impact your credit score.

What happens if I don’t pay my credit card for 5 years?

After just six months if you don’t pay your credit card, the credit card company is required to charge-off the account. This means they will close your account and write it off as a loss. However, you will still be responsible for repaying the outstanding balance either to your creditor or a third-party collections company.

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Photo credit: iStock/MStudioImages

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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Whether you need to pay your rent or make a large purchase, a money order can be a payment 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 or have some other motivation, using your credit card is sometimes an option.

However, be forewarned: Buying a money order with a credit card can involve getting a cash advance and come at a hefty cost. Here’s what you should know about trying to buy a money order with a credit card.

What Is a Money Order?

A money order is essentially a prepaid check. In terms of how a money order works, 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, people who 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 financial 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.

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.

Pros

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 (what’s known as being unbanked), 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.

Cons

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, it may be considered a cash advance (more on this in a moment). 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 credit card 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

Whether you should buy a money order with a credit card 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.

The Takeaway

Money orders can be a safe and secure alternative to cash or personal checks. Some recipients prefer receiving money orders because they won’t bounce and they come with a receipt. However, it’s typically not possible to buy one directly with a credit card. Instead, you would likely have to get an expensive cash advance on your credit card to fund the money order. It’s wise to think twice about using your credit card this way.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

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 negatively 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?

You can get cash from a credit card by requesting a cash advance through an ATM, bank branch, or convenience check. However, take note: Your credit card issuer may apply a fee and a higher APR for the cash advance.

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Photo credit: iStock/sturti

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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If you’ve purchased a product or service using a credit card and never received it, or if the item arrived damaged, then you may be eligible for what’s known as a chargeback. A credit card chargeback is when a bank reverses an electronic payment to trigger a dispute resolution process.

In this guide, you’ll learn more about what a credit card chargeback is, how it works, and when you may be able to request one.

What Is a Credit Chargeback?

Credit card chargebacks usually occur between a merchant and a bank that issued the credit card used for the transaction. Chargebacks are used to reverse a payment after a billing error, unauthorized credit card use, or the failure to deliver a product or service. You can also request a chargeback when the goods or services that you paid for with your credit card you received aren’t delivered as advertised.

For example, if you ordered a red jacket, and you received a blue one, you could request a chargeback if the merchant refuses to exchange or refund your purchase.

Chargebacks can be initiated for almost any merchant that accepts credit card payments.

Credit Card Chargeback vs Refund

While both a chargeback and a refund can result in you getting your money back, they aren’t the same thing. Knowing the difference is an important part of understanding how credit cards work.

•   With a refund, it’s the merchant rather than the consumer that initiates the return of funds. Additionally, a consumer typically deals with the merchant to get a refund

•   When a chargeback occurs, it’s the bank issuing the credit card that you’ll work with.

How Does a Credit Charge Back Work?

If you have an issue with a product or service you received or you notice a charge on your credit card statement that you don’t believe was authorized, you can initiate a credit card chargeback. These are some details about how this typically works:

•   You can usually only make a chargeback within 120 days of the date of purchase.

•   Once you’ve contacted the credit card issuer to dispute the charge, the bank will take over the process and contact the merchant. The merchant will have the opportunity to either accept or refute the chargeback, and you may be asked to provide evidence supporting your request.

•   At the end of the investigation, the chargeback will either be accepted, in which case you’d get your funds back, or it will be rejected.

•   If you disagree with the decision, you can always continue to dispute the charge through a process called arbitration.

When to Use a Chargeback

The Federal Trade Commission (FTC) provides protections to consumers who use credit cards, including the right to accurate billing, protection from unauthorized charges, and the right to dispute credit card charges for goods or services that are different than described. As such, chargebacks are issued for a variety of reasons.

Before proceeding, however, keep in mind that if there was an issue with your service or goods, you may consider giving the merchant the opportunity to make it right before requesting a chargeback.

Fraud or Unauthorized Use

A common reason to request a credit card chargeback is due to fraud or unauthorized use. If you don’t recognize a transaction on your credit card statement or believe someone used your card without your authorization, you may consider requesting a credit card chargeback.

Moving forward, a good way to prevent credit card fraud can be to keep your credit card expiration date and CVV number on a credit card safe.

Incorrect Amount

If an amount on your credit card bill is incorrect, you can file for a chargeback. For example, if the merchant adds an extra zero to your bill and you can’t reach the company to have it corrected, then this would be a good time to request a chargeback — especially if the overcharge has pushed you close to your credit limit.

Recurring Billing Was Not Stopped

If you cancel a subscription service but continue to be billed afterwards, a chargeback can make sense. It can help if you have proof in hand that you had canceled the subscription already.

Goods and Services Not Delivered

Paying for a good or service that you never received is another reason to file a chargeback. If you order something that never arrives and are unable to get the company to send it or give you a refund, then filing a chargeback may be your best course of action. After all, you don’t want to potentially pay interest on something you never received, even if you do have a good APR for a credit card.

Goods or Services Were Not as Described

If you receive a good or service that was substantially different from what was described or agreed to, you can file a chargeback for the cost of that good or service. For example, if you paid to have work done on your house, but it was done incorrectly and the service provider refused to fix it, then you could request a chargeback.

However, remember that the merchant will get the opportunity to prove that the services were provided as described.

Return Credit Not Processed

If you returned an item or canceled a service within a merchant’s return policy but never received credit for the return, such as a refund, you can file a chargeback with your credit card. This can help you recoup the funds you were owed (plus any credit card interest that may have accrued in the meantime).

Recommended: How Many Credit Cards Should You Have?

How to Submit a Chargeback

Here are the typical steps for submitting a credit card chargeback:

1. Contact Your Bank or Card Issuer

To submit a chargeback, you first initiate the process with your bank or card issuer, often through its website. Some card issuer websites allow you to initiate or process most disputes entirely online. Otherwise, you can call your card issuer to file the chargeback or request a chargeback by mail.

2. Receive Confirmation of Your Request

After you’ve submitted the chargeback request, your bank will provide written confirmation of your chargeback request. They will then either post a temporary credit to your account to cover the disputed amount or pause required payments and APR on a credit card on the disputed amount while the issue is being investigated.

3. Wait While Your Request Is Submitted to the Merchant

Next, the bank will submit your chargeback request to the merchant. The merchant has a certain amount of time to respond to the bank’s inquiry.

During the investigation, make sure that you continue to pay your credit card bill for the remaining charges. At the least, make sure that you’re making the credit card minimum payment. Otherwise, you’ll end up paying interest on the non-disputed charges.

4. Receive a Decision

If the chargeback is accepted by the merchant, your billing dispute will be closed and your bank will provide an account credit to cover the disputed charge.

However, if the merchant rejects the chargeback request, your bank will evaluate the information and make a decision, which they will notify you about in writing. If you disagree with the bank’s decision, you can dispute your bank’s decision through the bank’s dispute resolution process.

Recommended: What Does Preapproved Mean for a Credit Card?

The Takeaway

Credit card chargebacks allow you to dispute a charge on your credit card. You can initiate a chargeback from a variety of reasons, such as fraud or unauthorized use, being billed for an incorrect amount, or encountering a situation where goods or services either aren’t delivered or aren’t provided as described. To start the process, you’ll contact your credit card issuer, and they will then reach out to the merchant.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What happens when you submit a chargeback?

When you submit a chargeback, you initiate the process with your bank. The bank contacts the merchant for the request, and the merchant decides whether to accept or reject the chargeback request.

Does a chargeback hurt your credit?

A chargeback doesn’t hurt your credit in itself, but any unpaid credit card bill during the dispute process could temporarily impact your credit score. If the disputed charge or charges are large and comprise a significant portion of your credit limit, this could also negatively affect your credit score temporarily, since your credit utilization ratio will be high.

Are chargebacks always successful?

Chargeback requests are not always successful. The merchant can respond that the charge is valid and provide documentation to support the claim. In this case, the credit card issuer may deny your request for a credit card chargeback.

How much is the chargeback fee?

A chargeback fee only applies to the merchant, not to the customer. The average chargeback fee is less than 1% (0.60%, to be exact), but businesses with more chargebacks will face higher fees.

Is it worth fighting a chargeback?

Whether it’s worth fighting a chargeback depends on a variety of factors and will vary from person to person. Consider the amount in question, the time it may take, and the reason for the chargeback request. It’s also a good idea to contact the merchant first to give them a chance to correct the problem before requesting a chargeback.

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Photo credit: iStock/PamelaJoeMcFarlane

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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