If you need to make a payment or send money, a money order could be a safer alternative to a personal check or cash. You can typically buy one with cash, a transfer from your bank account or a debit card, and some money order merchants will also accept credit cards as a form of payment.
While using your credit card might sound convenient, it may be more trouble than it’s worth.
How to Use Money Orders
A money order is similar to a personal check in that it’s a paper document the recipient can cash or deposit into his or her bank account. You can use a money order to pay rent and other bills, send money to family and friends or even pay for online orders with some retailers. There are, however, a few differences that make them a preferred payment method in certain situations, noted below.
Funds are guaranteed. When you use a personal check, the funds are guaranteed only if there’s enough money in your bank account to cover them. As a result, many merchants don’t accept personal checks for goods and services. Money orders require payment up front, so there’s no question whether it will bounce.
No bank account is required. Roughly 9 million U.S. households don’t have a bank account, according to a 2015 survey by the Federal Deposit Insurance Corp. A personal check typically requires a checking or money market account, while a money order can be purchased at the post office or retailers using other payment methods.
Your information stays safe. Personal checks show your routing and account numbers, and often also include your address, phone number and the name of other people on the account. If you don’t know or trust the person who will be handling your check, a money order — which contains less personal information — may be preferable.
You can use a foreign currency. If you want to send money to another country, you can purchase a money order in a foreign currency, something that isn’t possible with a personal check.
Security. A money order with a designated recipient is much safer than cash if you’re mailing a payment. Lost or stolen money orders can be replaced for a fee.
That said, money orders aren’t free. For example, the U.S. Postal Service charges up to $1.65 for domestic money orders and up to $18.45 for international money orders.
Where Can You Buy a Money Order With a Credit Card?
Only two major merchants allow you to purchase a money order with a credit card: Western Union and 7-Eleven. Other money order providers, including Walmart, MoneyGram and the Postal Service, do not accept credit cards as a form of payment for money orders.
If you don’t have enough cash on hand or money in your bank account to buy a money order, using a credit card is an option. But it should be a last resort because of fees and interest.
Credit card issuers like Capital One, American Express, Chase and others consider money orders a cash equivalent, which means the transaction will code as a cash advance rather than a regular purchase.
A cash advance is essentially a cash loan from your credit card’s line of credit, says Maggie Germano, founder and CEO of Maggie Germano Financial Coaching. “There are extra fees that come along with getting a cash advance,” she says, “(and) there also may be higher interest rates.”
On top of the money order fee, the costs of getting a money order via credit card include some of the things below.
Cash advance fee. Most credit cards charge a cash advance fee of 3 to 5 percent of the transaction amount with a minimum fee of $5 to $10. On a $1,000 money order, that’s a fee of $30 to $50 on top of the money order fee.
Cash advance APR. Many credit cards charge a higher APR on cash advances than they do regular purchases. With some cards, it can be as high as 25 to 30 percent. Depending on what your regular purchase APR is, you could end up paying much more when buying a money order with your credit card.
You won’t get a grace period. With regular credit card purchase, you typically have a grace period of at least 21 days between your statement date and your due date. You won’t pay any interest on your balance as long as you pay it in full by the due date. Cash advances typically don’t qualify for a grace period, says Mike Sullivan, personal finance consultant with Take Charge America, a nonprofit credit counseling and debt management agency based in Phoenix. That means the higher cash advance APR starts accruing from the date of the transaction. “(That combination) makes cash advances a very expensive way to borrow money,” he says.
Because cash advances are so costly, it’s best to find another means to purchase a money order. The only exception is if your only other option is to use an even more expensive form of payment. Payday loans and auto title loans, for instance, may charge triple-digit APRs, making them significantly more expensive than a credit card cash advance.
One thing to note, however, is that credit card companies are required to apply any amount you pay in excess of the minimum payment to the debt with the highest rate first. So, if you use your credit card to purchase a money order, your payments would pay down that amount before your regular purchases, which can help you save money. But it could interrupt your progress if you’re trying to pay down existing debt.
Last Resort Options to Consider
If you need a money order to pay a bill or send money, but don’t have the cash or checking account balance to cover it, consider using a credit card only after you’ve pursued all of your options. Here are some to think about.
Ask if you can pay by credit card. If you need to make a rent, utility or other bill payment, you may have the option to pay with your credit card directly. Often, these types of merchants will charge a small fee to use your credit card, but it’s cheaper than a money order and cash advance fees and interest.
Get a loan. The average personal loan interest rate is 10.12 percent, according to August 2018 data from the Federal Reserve. That’s significantly less than a typical cash advance APR. If your credit isn’t great and you can’t qualify for a low interest rate, consider applying for a secured personal loan or asking a family member or friend for a short-term loan. Germano recommends drawing up an agreement if you ask friends or family for a loan.
Request a salary advance. Ask your payroll manager if you can get an advance on your next paycheck. Depending on your employer, you may need to pay it back over time with interest or simply miss your next paycheck. Ask about the terms, and make sure that the payments or missed paycheck won’t make matters worse for your cash flow.
Earn extra cash. Selling items you own or working a side gig could help you free up cash quickly for a money order.
As you consider these and other options, make sure you understand what your costs are and whether it’s worth it.
“The only times a person should get a cash advance is when it is the least expensive option or the only available option,” says Sullivan. So, if it’s necessary to buy a money order, do your due diligence to ensure that you spend as little money as possible in the process.
More from U.S. News