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You're casually scanning Craigslist or NextDoor when you see someone selling the used car of your dreams. There's only one problem: They want you to pay with a money order, and you don't have enough cash to buy one. So you might be wondering, can you charge the money order to your credit card? You can use a credit card to pay for a money order, but it should be thought of as a last resort. Read on to learn why.
What Is a Money Order?
A money order is an alternative to checks or cash when you need to make a secure payment and can't or don't want to use your bank's online payment options or an online payment app such as Venmo or PayPal.
You must pay for a money order upfront. Unlike a check, which can bounce, this makes it a guaranteed payment to the recipient and is why some people and businesses prefer to use them.
Money orders must be made out to a specific person or business and can only be cashed by that recipient. Because cashing a money order requires presenting ID in person, you typically don't have to worry that a thief will get their hands on your funds.
Money orders often have a limit of $1,000, although some issuers have smaller limits. If the amount you need to send is larger than that, you'll have to buy more money orders. For instance, if you wanted to buy $3,000 in money orders from a location that limits money orders to $500 each, you'd have to buy six money orders. There may also be limits on the total dollar value of money orders you can buy in one day. For example, the U.S. Postal Service limits you to $10,000 worth of money orders per day.
Why Should I Use a Money Order?
People who don't have checking accounts often use money orders to make large payments, such as paying rent or making a big purchase from an individual. Some individuals may insist that you use a money order to pay them.
If you worry that using a check could lead to identity theft because checks include your bank account number, you may feel safer using a money order, which doesn't provide any of your bank account information.
You can also use money orders to send money internationally, such as to relatives in another country. Most sellers of money orders have branches in major cities worldwide. Before you buy a money order to send to another country, make sure the recipient has a way to cash it near where they live.
Where Can I Buy a Money Order?
Money orders are available from a wide range of places, including banks and credit unions, check-cashing or payday loan businesses, grocery stores, convenience stores and the post office. Members of the military can also purchase them at military facilities.
You'll pay a small issuing fee based on the money order amount. Fees vary depending on the location issuing the money order; they're generally a few dollars at most. For instance, at the post office, issuing fees range from $1.25 to $1.75; at Walmart, the maximum fee is $0.88.
How Do You Buy a Money Order With a Credit Card?
In most cases, you'll need to buy a money order with cash or a debit card. Because issuers want the money in hand before they issue the money order, you cannot pay with a personal check. The only places that let you buy a money order with a credit card are 7-Eleven stores and Western Union.
If you plan to charge a money order, be aware that your credit card company may consider a money order purchase to be a cash advance, which has some significant downsides. You'll be charged more interest on a cash advance than you would for a regular purchase—sometimes a lot more. While credit card purchases give you a grace period before interest on the purchase begins to accrue, interest on cash advances usually starts to accrue immediately. On top of these costs, your credit card issuer may charge a fee of $20 or more for the cash advance.
Taking a cash advance can also hurt your credit score if it raises your credit utilization ratio to more than 30%. If the credit card you use is already carrying a balance, the issuer may put your future payments toward the purchase balance before putting them toward the more expensive cash advance balance. This can make it harder to pay down your balance.
To protect yourself from unexpected charges, read your cardholder agreement carefully or check with your credit card issuer to see if using a credit card to buy a money order is considered a cash advance.
How Do You Fill Out a Money Order?
Money orders are easy to fill out, but it's important to fill out the money order correctly. Otherwise, the recipient might not be able to cash it.
You'll need to write on the money order the name and address of the person or business receiving it. It's a good idea to double-check the name spelling first because the money order will be checked against the recipient's ID when they try to cash it.
Sign the money order and be sure to get a receipt for it. You must have a receipt if you want to cancel the money order or if it goes missing and you need to prove that you purchased it.
How Do You Cash a Money Order?
To cash a money order, take it to a bank, credit union or check cashing store. You can also take it to another location of the organization that issued it, such as a post office, grocery store or convenience store. No matter where you cash it, you'll be asked to show identification and sign the back of the money order, just as you would when cashing or depositing a check.
Do Money Orders Expire?
Money orders do not expire. However, if you've received a money order and don't cash it within a certain time frame, the issuer may begin charging a monthly service fee. When you do cash the money order, that fee will be deducted from the total amount you receive. It's a good idea to review the terms and conditions listed on the back of the money order as soon as you get it. Note if there are any service fees and, if so, how long you can wait to cash the money order before fees start to accrue.
How to Avoid Money Order Scams
Legitimate money orders are a secure way to transfer funds. Unfortunately, scam artists sometimes use forged money orders to commit fraud. It can take a week or more after you deposit a fake money order for your bank or credit union to uncover the sham—at which point they'll immediately take the funds out of your account. That could be a problem if you've already spent that money.
To protect yourself, be on the alert for these common money order scams:
- Online shopping scam: An online seller insists you use a money order to pay for merchandise. You send the money order, but they never send you the product. If you're using a money order to make a purchase, it's best to conduct the transaction in person. That way, you can get the product in hand before you give the seller the money order.
- Bogus buyer: A thief sends you a fake money order to pay for a product you're selling. By the time you realize the money order is fake, you've already shipped the merchandise. If customers ask you to ship products to a private P.O. box, it's often a warning sign of this scam.
- Bogus buyer's remorse: A scammer buys something from you with a fake money order. You cash the money order and prepare to send them the goods. Before you do, however, they ask to cancel the order and get a refund. They might offer to let you keep part of the payment for your trouble but send them back the rest of the money order. When it's discovered the payment was fraudulent, the check-casher may come after you for fees as well as a return of the fraudulently issued funds.
- Rental reversal: The scam artist sends a forged money order to pay for a non-refundable security deposit, plus some or all of the charge, for a bed-and-breakfast or vacation rental stay. They quickly cancel the reservation and request a refund. You deposit the money order, keep the security deposit and send them the rest of the money before it's discovered the money order is a fraud.
- Overpayment ploy: Scammers may send you a money order for more than the price of the merchandise you're selling. They then claim it was an error and ask for the overage to be returned.
- Deposit assistance: A stranger claims they don't have a bank account, so they need you to deposit a money order for them and then send them the funds.
To prevent fraud, the FTC recommends you never send a money order to someone you don't know, people who say they only accept money orders or people who ask you to keep the transaction a secret. Here are a few other steps to help you avoid money order scams:
- Verify funds. Before you cash a money order, contact the issuer listed on the back of the money order to confirm that it's genuine.
- Look for signs of forgery. These can be hard for a novice to spot, but you can take the money order to a location of the issuer and ask them to inspect it.
- Check for tampering. Does the amount look like it's been erased or added to? If so, it could be a scam.
- Don't use funds from a money order right away. Wait a week or two after depositing a money order to use the money or issue any refund to the sender.
- Be wary of pressure tactics. Scammers typically rush you to deposit the money order or send them a refund right away. They might play on your sympathy by claiming they need the funds for an operation. Some may use scare tactics such as threatening to sue you or ruin your online reputation. When it comes to money orders, be suspicious of anyone who insists you act immediately.
Using Money Orders Wisely
Money orders can be useful tools for exchanging and sending money securely, but it's important to understand how they work—including their risks and limitations. Although some issuers let you buy a money order using a credit card, many credit card issuers consider this a cash advance and may charge you additional fees and high interest rates. If you do need to use a money order for whatever reason, buying it with a credit card should be your option of last resort.