Understanding Money Orders: A Comprehensive Guide

At O1ne Mortgage, we prioritize consumer credit and finance education. This blog aims to provide an objective view to help you make the best financial decisions. If you have any mortgage service needs, feel free to call us at 213-732-3074. Let’s dive into the world of money orders and explore their uses, where to buy them, and the implications of using a credit card for such purchases.

What Is a Money Order?

A money order is a secure form of payment that functions similarly to a paper check but is not linked to your checking account. People often use money orders if they lack a checking account, need to send money overseas, or are concerned about a check being lost or stolen in the mail. Additionally, money orders are useful when you prefer not to share your checking account or payment app data with another individual. Unlike personal checks, money orders do not contain information that could lead to identity theft.

Since you must pay for a money order upfront, the recipient is assured that the payment is guaranteed, unlike a personal check that could bounce. To cash a money order, identification is typically required, making it difficult for anyone else to cash it if it is lost or stolen.

Where Can You Buy a Money Order?

Money orders can be purchased at various locations:

• U.S. post office branches, including military post offices
• Banks and credit unions, typically for their customers
• Retail locations such as Walmart, supermarkets, convenience stores, and drugstores, usually through MoneyGram and Western Union agents
• Check-cashing stores, which cater to people without bank accounts

Generally, money orders must be bought in person. Before visiting a location to purchase a money order, inquire about:

• Any identification required to buy a money order
• Accepted forms of payment
• Limitations on amounts
• Fees, which typically range from less than $1 to $5, depending on the amount and location

Not all locations that sell money orders handle international money orders. If you need to send money internationally, verify this before visiting.

Can You Pay for a Money Order With a Credit Card?

Typically, you can only use cash or a debit card to buy a money order. In the past, some locations like Western Union and 7-Eleven accepted credit card payments for money orders, but this is no longer the case. You also cannot buy a money order with a personal check.

If you don’t have the cash on hand for a money order, you could get a credit card cash advance at your bank, credit union, or ATM and use the cash to purchase a money order. However, this can be a costly option and is generally not advisable.

Should You Buy a Money Order With a Credit Card?

There are several reasons to avoid using a credit card cash advance to buy a money order:

• The annual percentage rate (APR) for a credit card cash advance is generally higher than the APR for a purchase—often much higher.
• There’s typically a fee for a cash advance, either a flat rate or a percentage. It’s usually $10 or 5% of the amount of the advance, whichever is higher, but some credit card issuers charge more.
• A cash advance could negatively impact your credit score if it increases your credit utilization ratio. Using more than 30% of your available credit can do extra damage to scores.
• Credit card purchases have a grace period before interest starts to accrue. However, interest on cash advances usually begins accruing immediately.
• If you already have a balance on your credit card, some card issuers put future payments toward your purchase balance before putting them toward your cash advance balance. Because cash advance balances incur more interest, this can make it tougher to pay off your balance.

You can find the APR, fees, and other cash advance terms in your credit card agreement or by contacting your credit card issuer.

The Bottom Line

Money orders offer a way to make certain purchases or transfer funds to a business or individual. However, there are plenty of less cumbersome options such as paying with a check, using a payment app like Zelle, PayPal, or Venmo, or using a wire transfer or online bank transfer.

Purchasing a money order with cash won’t affect your credit, but using a credit card to buy a money order could lower your credit score if it pushes your credit utilization too high. Your credit score might also suffer if paying off a high credit card balance makes it difficult to pay your other bills. By regularly checking your credit report and setting up free credit monitoring, you can spot potential risks to your credit and take steps to resolve them.

For any mortgage service needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with one of our expert loan salespersons. We are committed to providing you with the best financial advice and services.