Can I purchase a money order with a credit card?

Money Orders and Credit Cards: A Convenient But Costly Combination

Money orders serve as a practical and secure method for sending funds, especially when a personal check isn’t ideal or cash isn’t preferred. But what happens when you want to purchase one using a credit card? While it’s often possible, the convenience comes with significant financial drawbacks that warrant careful consideration.

The crux of the issue lies in how credit card companies classify the purchase of a money order: it’s almost universally treated as a cash advance, not a regular purchase. This seemingly subtle distinction triggers a cascade of fees and interest charges that can quickly inflate the actual cost of the money order.

Here’s a breakdown of why using a credit card for a money order is generally a bad idea:

• Cash Advance Fees: Credit card companies typically impose a separate fee for cash advances. This fee is usually a percentage of the transaction amount or a flat fee, whichever is higher. For example, you might be charged 3-5% of the money order value or a flat $10 fee.
• Immediate Interest Accrual: Unlike regular credit card purchases that offer a grace period before interest charges kick in, cash advances typically start accruing interest immediately.
• Higher APR: The interest rate (APR) applied to cash advances is often significantly higher than the rate applied to standard purchases. This means that the interest accumulating on your money order purchase will be more expensive than the interest on your everyday spending.
• Reduced Credit Line: The amount you use for the money order will reduce your available credit line, potentially impacting your credit utilization ratio, a factor that influences your credit score.

Why is it treated as a cash advance? Credit card companies view money orders as being close to the equivalent of cash. Allowing purchases of money orders with standard credit card terms could be used for unintended activities, such as converting credit to cash.

A Better Alternative: Debit Cards

If you’re looking for a convenient alternative to cash for purchasing a money order, consider using a debit card. Debit cards directly access funds from your bank account, bypassing the cash advance limitations associated with credit cards. Using a debit card for a money order purchase typically incurs no additional fees or interest charges.

Before you proceed, consider:

• The Money Order Provider’s Policies: Not all money order providers accept credit cards. Before heading to a location, confirm their accepted payment methods.
• Your Credit Card Terms: Review your credit card agreement to understand the specific fees and interest rates associated with cash advances.
• The Total Cost: Calculate the total cost of using a credit card, including the purchase amount, cash advance fee, and potential interest charges, and compare it to other payment options.

In conclusion, while purchasing a money order with a credit card is often possible, it’s a financially unwise decision for most consumers. The associated fees and high interest rates can significantly increase the cost of the money order. Opting for a debit card or using cash provides a more cost-effective way to access this useful financial tool.