I noticed that my local convenience store sells Money Orders “up to $500.00” for $1.25. It made me wonder why anyone would get a “cash advance” with a credit card, what with the much higher interest charges and additional fees.
When the clerk at the store rings up a money order purchase he simply enters the numbers into the cash register and collects from the customer. Some stores still have the old manual card-imprint system with no electronic connection. One could theoretically put the $500 money order on a low-interest Visa and probably save about $20(?) or so. I can’t see how the credit card company would know that it is not for merchandise (in spite of the high amount for a convenience store). The money order could then be deposited into a checking account and used as cash.
I’m sure I’m missing something obvious that would prevent such credit purchases, unless it does happen all the time and I have never noticed.
So, what’s the deal with credit cards and money orders?
Yes, there are vendors who will take a credit card in payment for a money order. My unsubstantiated guess on why most credit card companies charge fees for cash advances but not for purchase of a money order: If the credit card being used is stolen or otherwise unauthorized, it’s harder to trace cash than a money order, thus there is more likelihood of a loss being incurred by the credit card company on cash advances. Just a guess.
Credit cards do not charge the buyer for purchases because the store is paying. In a cash advance the customer has to pay. if you bought a money order you can be sure you would be charged as a cash advance.
Here’s the theory behind why most sellers of money orders do not allow you to purchase them with credit cards.
Money orders are traditional substitutes for checks, used to pay debts. By using a credit card to purchase one, you are paying one debt (whatever the money order is for) by creating a debt. (increasing your credit card balance) It’s kiting funds or robbing Peter to pay Paul.
Right. I don’t use a debit card so I forgot that. The difference is that the cardholder pays the fee on a debit card. With a credit card the debt is discounted by the bank. I.e. when the credit card slip is cashed you only get about $0.97 on the dollar. The Postal Service won’t accept that.
It is defintely wrong. I bet if you were to inform on the store the practice would be stopped. I bought CDs from a used CD store and Twice they gave me the wrong CD. Instead of crediting the card they refunded me cash. I know this isn’t correct but what do I care.
I recently noticed my grocery store will not take Credit Cards for the purchase of Gift Cards from Nordstroms, AT&T, Borders, Sears, the Gap and all those other stores they sell gift cards for.
It isn’t wrong or illegal it just “cheats” the credit card company out of their fees. I am certain if they knew they would stop it.
Untrue (at least in my experience). I’ve lived in three different cities within the last year- Boston, Philly, and now southern Arizona- and each gladly accepted my credit card. The post office I currently use has signs posted everywhere informing the customer that credit cards are accepted.
I use credit cards all the time at Best Buy to purchase gift cards. I don’t see this as wrong nor do I think they should stop it. The gift cards AFAIK are universally not exchangeable for cash – only merchandise. Whereas a money order is good for cash, as are travelers’ checks.
I wouldn’t be surprised if any of this is not even really dependant upon the store having a policy, but the rules of the credit card company.
I could be wrong but, generally credit card transactions are easily challenged by the consumer. I would be willing to bet that most places who refuse have been burned by a successful challenge by a customer. Even if the challenge fails and the consumer has to pay the charge later, it could easily amount to a 60 day zero interest loan at the expense of the money order issuer.
As does mine. You can use a credit card for most items at the Post Office, but * it cannot be used to pay the face value cost of a money order.* You can use it for postage, shipping materials, the money order fee, etc.
For example, if you buy a $100 money order plus 10 of other items and .90 for the money order fee you can charge $10.90 to a credit card but you have to come up with $100.00 cash. Try it.
The reason I was given, by a postal worker, that you can’t use a credit or debit card to buy a money order is that after buying the order, you could then place a stop payment or call the credit card company and claim fraud. She (the postal worker) said that that has been done before.
But Joel, you can do that with any credit card purchase. What makes a money order any different? At least money orders paper trails when they are used (they eventually return to the issuer). The $500 watch you buy doesn’t.