Buying a Money Order with a Credit Card: Does It Make Sense?

You want to pay a bill or send money to someone. You either don’t have a checking account or you do not want to use one, so you elect to get a money order instead. All is well and good. But wait, you want to pay for that money order with a credit card. Is it possible? Moreover, does it make sense?

Money orders work a lot like certified checks. You give the provider cash in exchange for the money order. The provider deposits the funds into its own account so that, when the money order is cashed, the money is there to cover it.

People who use money orders often do so because they don’t have checking accounts. Yet there are those who prefer to use them in certain circumstances in which they don’t want checking account information being passed to someone else. That brings us back to the point of attempting to buy a money order with a credit card.

It’s Hard to Do

According to U.S. News & World Report, there are only two major providers in the U.S. that accept credit card payments for money orders. They are Western Union and 7-Eleven. While there may be some smaller providers and check-cashing centers that accept credit cards, you’ll have to pay with either cash or a debit card at major retailers like Walmart and the USPS.

This actually makes quite a bit of sense. Merchants pay a fee to run credit card transactions. Let’s just pull a number out of thin air and say it’s 5%. If a merchant issues $100,000 worth of money orders every year, it costs that merchant $5,000 to do so. That means the service fee they charge must account for credit card fees in addition to any other fees they have to charge to make a profit.

The other concern providers face is the risk of charge-backs. Remember, a money order is essentially a slip representing cash. The last thing a provider wants is to issue a money order that is cashed and then, within a day or so, have the purchaser request a charge-back from the credit card company.

It Doesn’t Make Sense

The bigger question is whether it makes sense to buy a money order with a credit card. In a word, no. Credit card companies charge interest. Moreover, they may treat money orders as cash transactions – meaning you get charged the cash advance rate rather than the purchase rate.

If you’re paying your credit card balance in full at the end of each billing cycle, you may be able to get away with purchasing a money order and not paying anything extra for it. But if you don’t pay your bill every month, realize that your credit card company applies your monthly payments to purchases first. All purchases must be paid off before payments are applied to cash advances.

Better Ways to Pay

There are better ways to pay for money orders than credit cards. If all you are worried about is passing on bank information to other people, take a withdrawal from your bank account and purchase your money order with cash. If you don’t have the cash, you may be better off asking a friend or family member for a short-term loan.

There is a reason that providers don’t like to accept credit cards for money orders. It is just a bad idea. If you need to buy a money order for whatever reason, pay cash for it. Either that or use your debit card. Do not use a credit card.