Money orders offer guaranteed payment of funds upfront for goods and services. Think of a money order like a prepaid check. There isn’t the requisite waiting around for the bank to clear the funds.
Paying via a money order might be a good option for a wide range of scenarios – transactions occurring between two people who don’t know each other too well, an establishment that wants a payment in cash or someone who doesn’t have a checking account but wants to purchase goods or services.
Paying an individual or institution via a money order sounds like a good idea, but what if you want to charge a money order through your credit card? Is this in your best financial interest?
Find out why paying for a money order via a credit card should be a last resort for most individuals.
See related: Can you send money with a credit card?
What is a money order and how does it work?
Money orders essentially work like cash since funds are guaranteed. The only caveat is a specific individual or institution is specified on the money order. Once a money order is purchased, the purchaser must fill out the recipient’s name, the amount and, in certain cases, the buyer’s address and phone number.
“A money order is a paper certificate issued by a government agency or banking institution,” said Steve Weisman, a Massachusetts-based attorney and professor. An individual pays the money order issuer cash to cover the money order plus a small fee.
One of the advantages of using a money order over checks is it “avoids putting bank account numbers or routing numbers on the document,” said Zach Reese, a CPA from Atlanta.
It is a secure way to make a payment, and there is less likelihood of fraud or identity theft associated with checks.
Money orders often have a receipt, so individuals can track if and when a recipient receives payment. It is possible to put a stop payment on a money order, and it is a safer option than sending or mailing cash.
Where can I buy a money order?
Money orders can be purchased from the U.S. Postal Service. Daily, approximately 269,000 money orders are sold at post offices across the country.
In addition, money orders can be purchased from “supermarkets and convenience stores, through checking or savings accounts in banks, credit unions, money transfer shops and payday loan stores,” said John Li of Fig Loans. Money orders usually have a maximum limit of $1,000. Depending on where a money order is purchased, there is a fee associated with the transaction.
Can an individual buy a money order with a credit card?
Yes, but only from a couple of merchants – Western Union and 7-Eleven stores. The U.S. Postal Service and other places will accept only cash, debit cards or traveler’s checks for a money order, according to Chris Panteli, financial expert and small business owner.
If a buyer decides to charge a money order to a credit card, be aware the credit card company may consider a money order purchase to be a cash advance, which has a downside. Significantly more interest is charged on a cash advance than a regular purchase.
See related: How credit card interest works
What are the pros of buying a money order with a credit card?
Financial experts are hard-pressed to identify more than a few positives associated with purchasing a money order via a credit card. If an individual has no other option and chooses to purchase a money order, there are some benefits:
- A credit card offers the ability to pay a small debt even if the individual doesn’t have cash on hand.
- Having the ability to purchase a money order with a credit card in an emergency situation may be helpful.
What are the cons of buying a money order with a credit card?
Most experts agree that buying a money order with a credit card isn’t the most cost-effective option for individuals. Michael Sullivan, personal financial consultant at Take Charge America, explains the disadvantages:
- It is more expensive. Using a cash advance adds a 3% or greater fee plus the interest cost. When added to the amount of the money order, this can make the purchase rather costly – perhaps even more than obtaining a cashier’s check from a bank.
- It isn’t easy to find locations that will allow the purchase of a money order via a credit card. Only Western Union and 7-Eleven stores allow purchases of money orders via credit cards.
- No rewards or points are credited because cash advance payments don’t qualify for them. Thus, incentives or discounts for future transactions are eliminated.
- A grace period doesn’t apply to pay off a cash advance. Cash advances begin accruing interest immediately.
- There are higher fees associated with cash advances. Cash advance fees are usually set at 5% or $10, whichever is greater. For a $200 money order, you’d pay $10 and for a $500 money order, you’d pay $25.
- The credit card will take a longer time to pay off because of the fees and accrued interest.
- Your credit card company will not reimburse you for the cost of a lost money order purchased with a cash advance.
One additional disadvantage is “taking cash advances can affect your credit score. So if you’re trying to improve your credit score, don’t even think of using your credit card to buy a money order,” adds Reese.
See related: Do bank overdrafts affect your credit score?
Most experts agree buying a money order through a credit card isn’t the ideal option and should be reserved as a last resort. It is more expensive, it will take longer to pay off your credit card balance, and could damage your financial future by adversely impacting your credit score.
It is possible to buy a money order with a credit card, but you shouldn’t. Your best bet is to pay for the money order in some other way rather than using a credit card to make the purchase.
If you are one of many Americans struggling with credit card debt, there are plenty of great strategies designed to get you out of it. From balance transfer credit cards to consolidation loans, there is no shortage of solutions to reduce your balances.
See related: How to pay off credit card debt: 3 best strategies
One unique service is trying to appeal to those with multiple credit card payments every month. Tally offers to consolidate your card payments and help you pay down your debt faster – all for less interest than you currently pay.
Read on to learn more about the service and if it is best for you.
What is Tally?
Tally is a mobile app available on both the Apple App store and Google Play store. It is designed to manage credit card debt and help its users pay down their balance faster.
Tally users link their credit cards, and the service automatically makes payments, using an algorithm to determine what size payments to make to each card – using factors like highest APR. In order to consolidate your debt, Tally will extend you a single line of credit to cover the payments it makes. That way, you just make one monthly payment to Tally and it takes care of the rest for you.
Right now, Tally is only available in certain states. Eligible locations include Arizona, Arkansas, California, Colorado, Connecticut, Washington, D.C., Florida, Georgia, Illinois, Idaho, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Mexico, New Jersey, New York, Ohio, Oregon, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington and Wisconsin.
How does Tally work?
Tally offers a few different solutions for its users, based on how you want to pay down your debt. The most common service is known as Tally Pays – and puts your repayment in the hands of the app.
Tally Pays is the heart of Tally debt management solutions. With this service, Tally will extend you a line of credit, based on a soft pull of your credit report. You’ll be offered a variable APR between 7.9% and 25.9% (accurate as of January 2021).
Once you’ve secured a line of credit, you can link your credit card accounts and let Tally start making payments for you. The app will automatically make payments based on its algorithm to try to save you as much on interest as possible and pay down your debt quickly.
Tally only makes payments to credit cards on your behalf if it can save you money on interest. That means if you have any cards with a lower interest rate than your Tally line of credit, the service won’t make payments on those cards. (Note: Tally always makes the minimum payment on your card. Read more on late fee protection later.)
In an economic emergency, covering even basic yet important expenses can be tough. For example, in 2020, the coronavirus pandemic rocked the foundations of millions of Americans. The National Multifamily Housing Council found that by Jan. 20, 11.4% of tenants had not sent money for their rent.
The last thing you want is to be evicted from your home because of nonpayment of rent. When used correctly, a credit card can help you through hard situations. Since the card issuer only requires a small minimum payment, it can buy you time before getting back on your feet.
Here’s how to charge rent, not just during a financial crisis but under normal conditions as well, advantageously.
See related: How to earn rewards when paying monthly bills
How to pay rent with a credit card
- How to pay through your landlord
- How to pay through third-party services
- Best credit cards to pay rent
- Pros of paying rent with a credit card
- Cons of paying rent with a credit card
How to pay through your landlord
First, ask your landlord if you can charge your rent. Some have software already set up to accept payments, so all you would need to do is provide your account information and your card will be charged. Larger property management companies are more apt to accept credit cards than individual landlords, but it’s worth an inquiry.
Bear in mind that there will be a processing fee, which typically falls between 2.5% and 2.99% of the transaction. The landlord will probably pass that cost to you, though it doesn’t hurt to ask if they’ll absorb the fee.
For example, if your rent is $1,800 and the fee is assessed at 2.99% of the transaction, the added cost would be $53.82. If the minimum credit card payment is 2% of the balance, your payment would be $36. Add the fee to it and all you’d need pay is $89.82 – a far cry from the $1,800 due.
If your landlord doesn’t offer this option, consider explaining your reason for wanting to charge the amount. If it’s not a permanent change to the rental agreement (which spells out the method and timing of your payments), your landlord may allow you to send the money via an app such as PayPal or Venmo on a temporary basis.
You would set up the app, attach your credit card to the account, and then follow through with the “pay-to” transaction:
- Locate your landlord’s profile name.
- Hit the “pay” function.
- The money is deducted from your credit card and sent to your landlord’s bank account on file.
- You receive the bill of the transaction amount plus the fee from your credit card company.
Yet another way to use your credit card to cover your rent is to take out a cash advance. It comes with some serious consequences that make this method your last choice, though:
- Fees can be 5% of the amount you withdraw.
- Interest rates are often higher on cash advances than they are on purchases.
- There is no interest-free grace period, as there is for purchases.
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How to pay through third-party services
An alternative to paying your landlord directly is to use a company that acts as an intermediary. The general process is simple:
- Sign up with the company.
- Identify your landlord.
- Enter your rent amount and due date.
- The company charges your card and sends your landlord the money in the form of a paper check or electronic transfer.
- You receive a bill from your credit card company and can send any amount that is at least the minimum payment.
You should have no trouble paying any landlord this way if the third party sends your rent with a paper check. It’s the same as if it were coming straight from your own checkbook.
However, if the company sends payments electronically, your landlord would need to register for an account so the money can be deposited.
But charging rent with a third-party company is becoming popular.
“We’ve seen a 50% increase in the number of Plastiq customers that are paying for rent with their credit card [in 2019] compared to 2018,” says Eliot Buchanan, co-founder and CEO of the consumer-to-business bill-paying company.
“However, there are card processing fees involved, so rent payers should compare the costs and benefits of paying rent on a credit card to determine whether it makes sense to do in their particular situation.”
Accepting credit cards for rent payments is a win-win, says Brian Davis, director of education for SparkRental.
“Landlords and property managers who accept rent by credit card offer more flexibility for their renters, with an option to stay current on their rent even if their bank account is short on the first on the month,” says Davis.
Review a variety of third-party companies before deciding on one, paying close attention to the fee structure and whatever unique benefits they may have.
||Up to 2% cash back on transactions, depending on your card.
||2.99% – 3.99%
||Earn “MoolaPerks” for deals on travel, shopping, home service providers, etc.
||2.99% – 3.99%
||Designed for landlords with a more challenging tenant base.
||Can pay via app, by replying to a text or by phone.
||For landlords who prefer paper checks.
||Can add low-cost renter’s insurance to the payment.
Best credit cards to pay rent
Some rewards cards offer generous introductory bonuses. You can open an account for the specific purpose of using that bonus to offset the fees involved in charging your rent.
To get the bonus, you have to meet the card’s required minimum spend within the first three months of opening the card. When you do, the reward is yours.
If you get cash back, you can use the money as a statement credit. For cards that give points or miles, you can trade them in for cash too, but you won’t get as much for them as you would for things like travel.
Whatever the case, the introductory bonus will nullify the amount you’re charged in fees when use your card for rent. After that, you’ll be earning rewards on purchases, which will also offset the fees, should you continue to charge your rent.
Just a few examples include:
|Rewards credit card
|Wells Fargo Propel American Express® card
||$1,000 in first 3 months
||20,000 points ($200 cash value)
|Blue Cash Preferred® Card from American Express
||$1,000 in first 3 months
||$250 statement credit
|Citi Rewards+® Card
||$1,000 in first 3 months
||15,000 ThankYou points (redeemable for $150 in gift cards at ThankYou.com)
|Chase Sapphire Preferred Card
||$4,000 in first 3 months
||60,000 points (redeemable for $750 toward travel when you go through Chase Ultimate Rewards)
See related: Best rewards credit cards
Another option is to open a credit card that comes with 0% APR for an extended period of time.
You won’t be charged interest on the debt you carry over until the rate rises to the regular rate. Therefore, if you charge your rent and can only afford to pay the minimum, the debt won’t escalate with financing fees.
A few good examples include:
|0% APR credit card
||Intro APR purchase period
|ABOC Platinum Rewards Mastercard
||12 months (12.90-22.90% variable thereafter)
|Citi® Diamond Preferred® Card
||18 months (14.74-24.74% variable thereafter)
|Discover it® Cash Back
||14 months (11.99-22.99% variable thereafter)
See related: Best 0% APR credit cards
Pros of paying rent with a credit card
Aside from helping you through an emergency, charging rent has a few other benefits:
Build and improve credit history
Charging regularly, paying on time and keeping the balance at zero are the swiftest ways to establish a positive credit rating. Rent is a necessary expense, so why not parlay it into a high credit score?
Arthur Ruth, vice president of operations of Memphis Maids, a house cleaning service in Memphis, Tennessee, has been paying rent with his credit card for over 15 years.
“Using your cards so much, if you pay them correctly, you can save money and even improve your credit score,” says Ruth. “That’s something really important in this day and age.”
Cash flow freedom
When Ni’Kesia Pannell, an Atlanta-based journalist and entrepreneur, was temporarily short on cash, she took advantage of the credit card option.
“I was in between freelance gigs and needed to pay bills,” says Pannell. “The fees were high, but at the time, it was worth it.”
Once her financial situation returned to normal, she resumed paying by check.
In the same vein, if your rent is due on the first of the month but your income is sporadic, you may need some extra time to accumulate it all without any stress.
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