A money order is a payment order for a pre-specified amount of money. As it is required that the funds be prepaid for the amount shown on it, it is a more trusted method of payment than a cheque.
The money order system was established by a private firm in Great Britain in 1792. And was expensive and not very successful. Around 1836 it was sold to another private firm which lowered the fees. Sgnificantly increasing the popularity and usage of the system. The Post Office note the success and profitability, and it took over the system in 1838.
Fees were further reduced and usage increased further, making the money order system reasonably profitable. The only drawback was the need to send an advance to the paying post office before payment could be tendered to the recipient of the order. This drawback was likely the primary incentive for the establishment of the Postal Order System on 1 January 1881.
How to pay off credit cards fast
There isn’t one right way to pay off credit card debt, but there are some tried-and-true methods that could help you get your balances to zero.
Those methods fall into two broad categories — either pay off each debt individually or consolidate all of your debts into a single monthly payment.
Let’s take a look at four popular strategies for paying down credit card debt, along with the pros and cons of each, to help you decide which option is best for you.
If you carry credit card balances month to month, paying off that debt fast might be easier than you think. The key is developing a good plan and sticking to it. These four strategies can help you decide which course to take to quickly pay off any credit card debt.
Now, here are the steps you can take to get rid of your credit card debt fast:
1. Debt snowball method
The snowball method is a debt-repayment strategy that focuses on paying down the account with the lowest balance first. As you direct your larger payments toward that balance, you continue to make the minimum payments on your other accounts so you don’t end up paying late fees, hurting your credit, or even defaulting.
To get started, list your account balances in order from lowest to highest. Set up your budget to pay the minimum on all your credit card accounts except the one with the smallest balance. For that balance, but as much extra money as you can toward paying it off each month.
When the balance on that account is zero, but the money you were using to pay it off toward the account with the next-lowest balance. Continue until all your credit card balances have been paid in full.
Say you have three credit cards with balances of $700, $1,500, and $4,000. With the snowball method, you’d pay off the card with the $700 balance first. Then you’d move on to the card with the $1,500 balance, and you’d pay off the one with the $4,000 balance last.
The debt snowball method is effective because you’ll likely see progress quickly. When you get a few quick wins under your belt, you build momentum. This can help you stay motivated to continue working toward your goal of becoming debt-free. Plus, fewer outstanding balances may make the process seem less overwhelming.
The snowball method doesn’t take into account the interest you’re being charged. If your larger debts are also the ones with the highest interest rates, you may pay more in interest using the snowball method than you would with another debt-repayment strategy.
So if your goal is to minimize your interest payments while paying down debt, another repayment method may be a better choice.
2. Debt avalanche method
When you use the debt avalanche method, you focus payments on high-interest debts first, while making the minimum payments on the rest of your accounts.
When the account with the highest interest rate is paid off, but the money you’d allocated for it toward the debt with the next-highest interest rate. Repeat the process as many times as necessary until all your credit cards have been paid off.
Say you have three credit cards with APRs of 22%, 18%, and 12%. With the avalanche method, you’d pay off the card with the 22% APR first. Then you’d move on to the card with the 18% APR, and you’d pay off the one with the 12% APR last.
The biggest advantage of the debt avalanche method is the possibility of saving on interest charges. If you’re concerned about how much interest you’ll rack up while paying down your debt, this method may be a good strategy for you.
A debt-repayment strategy that helps you save money may be appealing. But if your account with the highest interest rate also has a large balance, it may take a while to pay it off. And that can work against you in your quest to become debt-free because it may be psychologically demoralizing.
Say you have a $5,000 balance on a card with an APR of 22%. If you pay $300 a month to that account, it will take 21 months to pay it off — as long as you don’t use the card to buy anything else.
Two years is a long time to wait to eliminate your first debt. With the avalanche method, you may not get those quick wins that help create a sense of accomplishment. So it’s easy to get discouraged and lose motivation to keep moving forward. If you need to see progress quickly to stay motivated, the debt snowball may be a better strategy.
3. Credit card consolidation loan
Personal loans that are used for debt consolidation combine multiple account balances into one loan with a single monthly payment — ideally with a lower interest rate. You use the funds from the loan to pay off your credit card balances, then make the payment on the personal loan each month.
Credit card interest rates are often higher than rates charged on personal loans, especially if you have good credit. If you qualify, you may be able to get a lower rate on a debt-consolidation loan than what the credit card companies are charging.
Plus, a debt consolidation loan can help simplify your finances. Instead of making multiple payments each month, you need to make only one for all the consolidated debts.
Also, some debt-consolidation loans offer flexible repayment terms, so you can select the one that fits your budget. And some lenders will send the loan payment directly to your creditors, so a debt consolidation loan can be a convenient option for paying off your credit cards.
You must meet the lender’s eligibility requirements to qualify for a debt consolidation loan. If your credit history has a few dings, you may not be able to get a loan. Or you may only qualify for an interest rate that’s similar to what you’re paying on your credit cards.
There’s the potential that you may not qualify for a loan large enough to cover the debts you want to consolidate, which means you’d only be able to consolidate part of your debts and would still have multiple payments to different lenders. Also, some lenders charge fees that add to the cost of the loan and eat into your funds.
4. Balance transfer credit card
A balance transfer credit card could let you transfer balances from one or more accounts to a different card. Typically, these credit cards have 0% introductory balance transfer APR offers if you transfer the balance within a certain amount of time after opening the account.
If you pay off your balance before the intro period ends, you can avoid paying interest. Knowing you have a limited amount of time before the intro offer expires may help motivate you to pay down your debt quickly.
Paying off your debt interest-free may seem like the best option of all, but if you make your payments late, your introductory offer could be revoked. Plus, the promotional period is limited — and if you have a balance when it ends, your account will accrue interest at the card’s regular balance transfer APR.
Also, you may be charged a balance transfer fee when you transfer balances from other cards, and you can only transfer balances up to the credit limit you’ve been offered on the card. If the amount of debt you have is higher than the card’s limit, this payment strategy may not be the best option for you. Also, even if you can transfer your entire balance, it may be bad for your credit scores if the amount you owe is near your limit on your new balance transfer card. So you’ll need to watch out for that, too.
Can you buy a money order with a credit card?
Money orders provide a method of secure money transfer to friends and family members. Credit cards can be used to purchase money orders, but finding merchants who allow customers to use credit cards is difficult. Typically merchants prefer customers to use cash or a debit card to guarantee the value of the money order because using a credit card carries financial risk and high-interest rates.
What Is a Money Order?
A money order is a paper form of payment similar to a personal check. People generally use money orders as a check or cash alternative when they’re seeking extra security and traceability. Money order’s purchased amount is guaranteed, meaning the purchaser must pay for the money order upfront from a retailer or merchant. The order must be made out to a specific person or business who receives the paper and can cash it at a different location—with ID in hand.
Pros and Cons of Money Orders
Money orders have advantages such as traceability—with a receipt that usually has the date of purchase, dollar amount, and banking code. Stolen or lost money orders are sometimes replaced by the merchant or bank. Money orders are useful for sending quick funds to a friend or family member either locally or even internationally. People who don’t have a checking account can still buy a money order to send cash to someone else.
Keep in mind that money orders usually have a limit as to how much the purchaser can buy. For example, if a retailer has a value limit of $1,000 for one money order, and the purchaser wants to send $3,000 to a family member, they will likely have to purchase three separate money orders. Most retailers or merchants charge a small fee for every money order purchased.
Should I Use a Credit Card to Buy a Money Order?
Although credit cards are useful for making everyday purchases. Using one to buy a money order is not likely to be a realistic option. Most retailers or merchants don’t allow money order purchases with a credit card. So it’s always better to consider using cash or a debit card first.
If a retailer will allow money order purchases with a credit card, keep in mind that many credit card issuers treat money order purchases as cash advances.
There are some downsides to this:
- Cash advances are more expensive than regular purchases. Cash advances typically have higher annual percentage rates (APRs) than regular purchases. They also incur fees (often 5% of the total advance or $10, whichever is greater). Unlike regular purchases which have a grace period, interest for cash advances begins to accrue immediately on the day of purchase.
- Cash advances often don’t count toward rewards, welcome bonuses, or other points. If a cardholder is hoping to make a dent in their minimum spend for a welcome bonus, using a cash advance won’t help.
- Cardholders are in danger of raising their credit utilization rate. Because interest for cash advances accrues immediately, there’s a serious risk the cardholder will rack up interest before what is borrowed can be paid off. Interest fees count toward a cardholder’s credit utilization rate, which is best to keep below 30%. A cardholder’s debt can quickly spiral if the cash advance is not paid off as soon as possible.
- Paying the minimum balance every month may not count toward a cash advance. Card issuers apply for a cardholder’s monthly payment as they see fit. They may apply monthly payments toward purchases that have a lower interest rate. This makes it harder to pay off a cash advance (and the rest of the card’s balance) in the long run as interest accrues quickly.
How to Use Money Orders
A money order is similar to a personal check-in in that it’s a paper document the recipient can cash or deposit into a bank account. You can use a money order to pay rent and other bills, send money to family and friends or even pay for online orders with some retailers. There are, however, a few differences that make money orders a preferred payment method in certain situations:
- Funds are guaranteed. When you use a personal check, the funds are guaranteed only if there’s enough money in your bank account to cover them. As a result, many merchants don’t accept personal checks for goods and services. Money orders require payment upfront, so there’s no question whether the order will bounce.
- No bank account is required. Roughly 7.1 million U.S. households don’t have a bank account, according to a 2019 survey by the Federal Deposit Insurance Corp. A personal check typically requires a checking or money market account, while a money order can be purchased at a post office or retailers using other payment methods.
- Your information stays safe. Personal checks show your routing and account numbers, and often also include your address, phone number, and the names of other people on the account. If you don’t know or trust the person who will be handling your check, a money order – which contains less personal information – may be preferable.
- You can use a foreign currency. If you want to send money to another country, you can purchase a money order in a foreign currency, something that isn’t possible with a personal check.
- It’s secure. A money order with a designated recipient is much safer than cash if you’re mailing a payment. Lost or stolen money orders can be replaced for a fee.
What Are the Costs of Getting a Money Order With a Credit Card?
On top of the money order fee, there are additional costs of getting a money order via credit card:
- Cash advance fee. Most credit cards charge a cash advance fee of 3% to 5% of the transaction amount with a minimum fee of $5 to $10. On a $1,000 money order, that’s a fee of $30 to $50 on top of the money order fee. “You don’t get anything from that besides the convenience of getting cash,” says Justin Pritchard, a certified financial planner and fee-only advisor in Montrose, Colorado.
- Cash advance APR. Many credit cards charge a higher annual percentage rate on cash advances than they do on regular purchases. With some cards, it can be 25% to upward of 30%. Depending on what your regular purchase APR is, you could end up paying much more when buying a money order with your credit card.
- You won’t get a grace period. With regular credit card purchases, you typically have a grace period of at least 21 days between your statement date and your due date. You won’t pay any interest on your balance as long as you pay it in full by the due date. Cash advances typically don’t qualify for a grace period, though. That means the higher cash advance APR starts accruing from the date of the transaction.
Because cash advances are so costly, it’s best to find another means to purchase a money order. The only exception is if your only other option is to use an even more expensive form of payment. Payday loans and auto title loans, for instance, may charge triple-digit APRs, making them significantly more expensive than a credit card cash advance.
Money Order Alternatives to Consider
Can you get a money order with a credit card? Yes. But if you need a money order to pay a bill or send money, and don’t have the cash or checking account balance to cover it, consider using a credit card only after you’ve pursued all of your options.
Here are some to think about:
- Ask if you can pay by credit card. If you need to make rent, utility, or other bill payments, you may have the option to pay with your credit card directly. Often, these types of merchants will charge a small fee to use your credit card, but it’s cheaper than a money order and cash advance fees and interest.
- Get a loan. The average personal loan interest rate is 9.46%, according to February 2021 data from the Federal Reserve. That’s significantly less than a typical cash advance APR. If your credit isn’t great and you can’t qualify for a low-interest rate, consider applying for a secured personal loan or asking a family member or friend for a short-term loan. Germano recommends drawing up an agreement if you ask friends or family for a loan.
- Request a salary advance. Ask your payroll manager if you can get an advance on your next paycheck. Depending on your employer, you may need to pay it back over time with interest or simply miss your next paycheck. Ask about the terms, and make sure that the payments or missed paycheck won’t make matters worse for your cash flow.
- Earn extra cash. Selling items you own or working a side gig could help you free up cash quickly for a money order.
Purchasing a money order with coins or a debit card is often a better choice. Then buy one with a credit card, even supposing a retailer accepts credit cards for cash order purchases. Maximum traders don’t receive credit cards for cash order purchases anyway. If essential, it’s far possible to use a credit card at Western Union to buy a money order but you ought to handiest don’t forget this as a final lodge.
Maximum credit score card issuers deal with cash order purchases as coins advance. Which could send the cardholder into spiraling debt if she. Or he is unable to repay the cash strengthen as quickly as feasible. Hobby starts to accrue on the day the acquisition is made. And usually at a higher rate than for regular purchases. Take care no longer to boom credit score utilization costs as this will hurt your credit score over time.
However, if there is anything you think we are missing. Don’t hesitate to inform us by dropping your advice in the comment section.
Either way, let me know by leaving a comment below!
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