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  #1  
Old 08-15-2003, 01:50 PM
speckfisher speckfisher is offline
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Can You Buy a Money Order With a Credit Card?

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?
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  #2  
Old 08-15-2003, 02:09 PM
Walloon Walloon is offline
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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.
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Old 08-15-2003, 02:12 PM
sailor sailor is offline
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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.
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  #4  
Old 08-15-2003, 02:14 PM
David Simmons David Simmons is offline
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Not from the US Postal service. Cash only for the money order face value. You cn pay the money order fee and postage with check, money order, cash.
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  #5  
Old 08-15-2003, 02:55 PM
Isabelle Isabelle is offline
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The 7-11 around the corner from me will only accept "cash" for money orders. You are not even permitted to use your debit card.
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  #6  
Old 08-15-2003, 03:19 PM
DrDeth DrDeth is offline
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There is nothing in Title 31 USC that says no, but many merchants and some MO companies will say no. However, a few allow it.
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  #7  
Old 08-15-2003, 03:51 PM
Chefguy Chefguy is online now
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Quote:
Originally posted by David Simmons
Not from the US Postal service. Cash only for the money order face value. You cn pay the money order fee and postage with check, money order, cash.
...or debit card, and they will give you cash back if you want it.
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  #8  
Old 08-15-2003, 04:01 PM
speckfisher speckfisher is offline
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Thanks, all.

So it is possible, but not a widespread practice.

I'm thinking maybe the Money Order companies that don't allow it are owned by banks that issue credit cards. Possible?

Or maybe I am just too cynical.
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  #9  
Old 08-15-2003, 05:32 PM
hardygrrl hardygrrl is offline
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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.
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  #10  
Old 08-15-2003, 06:40 PM
Walloon Walloon is offline
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But how is that different from getting a cash advance from your credit card?
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  #11  
Old 08-15-2003, 06:58 PM
David Simmons David Simmons is offline
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Quote:
Originally posted by Chefguy
...or debit card, and they will give you cash back if you want it.
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.
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  #12  
Old 08-15-2003, 07:17 PM
hardygrrl hardygrrl is offline
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Quote:
Originally posted by Walloon
But how is that different from getting a cash advance from your credit card?
Besides the fact cash advances accrue fees/finance charges up the metaphorical ying-yang? Not much.
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  #13  
Old 08-16-2003, 03:17 AM
Markxxx Markxxx is offline
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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.
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  #14  
Old 08-16-2003, 04:54 AM
dervinck dervinck is offline
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Credit cards and the post office

Quote:
Originally posted by David Simmons
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.
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.
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  #15  
Old 08-16-2003, 08:20 AM
Balthisar Balthisar is offline
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Quote:
Originally posted by Markxxx
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.
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.
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  #16  
Old 08-16-2003, 08:47 AM
drachillix drachillix is online now
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Quote:
Originally posted by Markxxx
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.
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.
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  #17  
Old 08-16-2003, 10:55 AM
David Simmons David Simmons is offline
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Re: Credit cards and the post office

Quote:
Originally posted by dervinck
The post office I currently use has signs posted everywhere informing the customer that credit cards are accepted.
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.
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  #18  
Old 08-16-2003, 11:46 AM
Nobody Nobody is offline
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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.
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Old 08-16-2003, 12:55 PM
Walloon Walloon is offline
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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.
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  #20  
Old 08-16-2003, 12:56 PM
Walloon Walloon is offline
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That should read, "At least money orders leave paper trails when they are used."
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  #21  
Old 08-16-2003, 01:29 PM
David Simmons David Simmons is offline
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Quote:
Originally posted by Walloon
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.
My WAG is that the money has to be transferred, eventually, to the paying Post Office which has paid out an amount in cash and expects to get back the same amount of cash in return from the issuing Post Office.
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  #22  
Old 08-16-2003, 01:47 PM
nebco9 nebco9 is offline
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The answer to this has been mentioned, but not clearly stated. The store selling the money order would lose money on the transaction.

Let's do some simple math here:

If I buy a $500 money order and am charged $1 for it (My local convenience store has a $500 limit and charges 99 for the money order), I will put a $501 charge on my credit card. Now let's say the store must pay the Money Order Co. a 50 fee(apprx.). Then the store would only make a 50 profit. They will be charged a transaction fee by the Credit Card Co., usually 1-2% of the charge(This can vary). At the 1% rate on a $501 purchase they would be charged apprx. $7.52 by the Credit Card Co. They would end up with a $7.02 loss on the transaction. Not a good way of doing business.
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  #23  
Old 08-16-2003, 01:59 PM
Walloon Walloon is offline
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I think nebco9 has nailed it. Normally with merchandise, there is a spread between wholesale price and retail price, within which the retailer can absorb the transaction cost of accepting a credit card. There is no such spread for a money order, which has a fixed face value.
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  #24  
Old 08-16-2003, 05:47 PM
Mr. Slant Mr.  Slant is offline
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Walloon and Nebco are on the money, and a lot of people don't understand this.
Imagine a $500 money order. Imagine paying $2 for the privilege of using a money order.
Cost to the store: over $500
Cost to you: $502
Now, on average a credit card costs 35 cents plus 1.75% of the overall transaction balance. If it's a Discover or Amex, it's closer to 35 cents plus 2% of the overall transaction balance.
Credit Card Transaction Costs to Merchant: $9.13
Cost to You of $502 minus $500 cost to merchant from the cost of the money order minus $9.13 in transaction fees equals a $7.13 cent LOSS to the merchant, minimum, in this scenario.
I know I darned sure wouldn't engage in that business activity at a store I held a stake in.

By the way, credit card companies generally discourage surcharges for using cards versus checks/cash, so a merchant may not want to just charge you the additional added expense of transactions like this... otherwise the above merchant could still make money by, say, tacking on $9.25 in additional fees for that money order.
The additional cost to the vendor is the reason why very little wholesale trade is conducted on credit cards. You'd hate to sell $3,000,000 in rolled steel and then wind up paying $52,500.35 to MasterCard.
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  #25  
Old 08-16-2003, 05:52 PM
Nobody Nobody is offline
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Quote:
Originally posted by Joel
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.
Don't question me, question the post office where I live that won't allow me to use my credit/debit card to buy money orders.
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  #26  
Old 08-16-2003, 05:56 PM
Nobody Nobody is offline
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Oops, quoted the wrong post.
I was trying to reply to Walloon's post:
Quote:
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.
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