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.
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 1½-2% of the charge(This can vary). At the 1½% 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.
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.
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.
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.
Oops, quoted the wrong post.
I was trying to reply to Walloon’s post: