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Some institutions accept credit card payments for money orders, while others don’t. It’s up to you to decide if it’s worth it.
The easiest way to find out whether you can purchase a money order with a credit card is to ask. But watch out — if you use your card to make your purchase, you may end up paying more than you expect.
That’s because many credit card companies consider money orders to be cash advances, which typically have fees of as much as 5% of the transaction amount, plus higher interest rates attached to them.What is a credit card cash advance fee?
If you want to avoid these additional expenses, consider using a different payment method, such as cash, a debit card or traveler’s checks, to buy your money order.
But before you decide what type of payment is best for you, let’s explore how money orders work and why you might need one.
What is a money order?
A money order is a guaranteed payment for a specific dollar amount that can be used to pay bills or send money to specific people. You can use money orders just like cash. But unlike cash, you’ll receive a receipt that allows you to track your funds or report your money order lost or stolen.
In general, money orders are limited to less than $1,000. If you need more than that, you’ll typically need to buy multiple money orders or choose a different form of payment.
What’s the difference between a money order, personal check and cashier’s check?
Not sure which payment method is best for your situation? Let’s examine three different options.
- Money order. Money orders are the equivalent of cash. Unlike personal checks, they’re prepaid, so there is little to no risk they will bounce. Because they’re typically capped at $1,000, money orders may be a good choice for paying small bills (like utilities or cable), making purchases under $1,000, or sending money to family and friends.
- Personal check. Unlike money orders, personal checks are not prepaid. When you write a check, you’re promising to pay an individual or business a certain amount of money. The money is withdrawn from your bank account when the check is cashed or deposited by the recipient. If you don’t have enough money in your account to cover the amount of the check, it can’t be processed, and the recipient doesn’t get paid, which may mean extra fees for you. Plus, passing a bad check can be illegal, so make sure you’re not writing a check knowing you won’t have sufficient funds to cover it. Since checks aren’t capped at a certain dollar amount, they can be used for larger purchases and situations where guaranteed payment is not required.
- Cashier’s check. This type of check is issued by a financial institution, such as a bank or credit union, not an individual. Unlike a personal check, the financial institution guarantees the availability of the money. If you need one, you pay the amount of the check plus a service fee. Cashier’s checks are a good option for larger purchases that require guaranteed funding.
Why you might need to buy a money order
If you’ve got the cash on hand, you may wonder why a money order might be necessary. Here are a few reasons.
- Sending money in the mail. If you need to send payment by mail, a money order offers more security than sending cash or a check. If your cash gets lost or stolen, it’s gone for good. But with a money order, you may be able to stop payment, though it may not be a simple process and will likely require additional fees. Also, money orders don’t contain sensitive financial information that can be stolen — unlike checks.
- Sending money to another country. Money orders can make it easier to send money abroad. If the bank or credit union issuing the money order has locations in multiple countries, you could buy a money order in one country and have your recipient cash it in a different one. The U.S. Postal Service also offers international money orders for select countries.
- It’s required. Many people don’t want to walk around with large sums of cash in their pockets. And they may not be willing to accept a personal check because they don’t want to take the chance it will bounce. In situations like these, money orders are generally a safe and trusted alternative to cash or personal checks.
Where can I get a money order?
You can buy money orders at a variety of different locations, including post offices, retail stores (such as Walmart), banks and credit unions, grocery stores and convenience stores. The fee to purchase one varies based on the amount of the money order and where you buy it. Most cost in the range of less than a dollar up to about $5, and some banks waive the fee if you have certain types of accounts with them.
What are the pros and cons of using a credit card to buy a money order
If you don’t have the cash on hand to buy a money order, using your credit card may seem like a simple solution. With a swipe of your card, you could have your money order in minutes. But you may also rack up cash advance fees and interest charges that may have higher rates than your other credit card debt.
“Typical APRs for cash advances … can greatly affect a user’s ability to pay off the balance of the advance — especially for those who have a history of making the minimum payment on pre-existing debts,” says Jeff Proctor, personal finance expert and co-founder of DollarSprout.com.
If you have no other option than to use your credit card, be sure to make your payments on time to avoid late fees and the negative impact that late payments may have on your credit scores. And consider making more than the minimum payment to reduce the amount you’ll pay in interest.
Although it’s possible to buy a money order with a credit card, it’s almost never a good idea because of the extra fees and interest charges you’ll accrue.
“I can’t think of a single good reason [to buy a money order with a credit card],” Proctor says. “In most instances, it would be recommended that [consumers] utilize cash-based methods to purchase their money orders.”