Can I Use a Credit Card to Buy a Money Order

xiv Min Read | Jan 3, 2022

Some things in life merely seem to go together: bread and butter, fall and pumpkin spice . . . everything, wallets and credit cards. All of those brand sense—except for wallets and credit cards. Have you ever actually stopped and asked yourself, "Do I need a credit bill of fare?" If not, today'due south the 24-hour interval.

Maybe your parents gave you a credit card just for emergencies when you lot were in loftier school. Or maybe y'all snagged one in college because some well-meaning person told you that y'all need a credit card to build up your credit. In either instance, information technology'southward time to shine a light on the hot topic of credit cards. Practice you really need one?

If y'all don't ain a credit card, finish reading this article earlier you sign the dotted line. And if you practise ain one . . . maybe you'll notice out that having a credit card isn't really necessary afterward all.

four Reasons Why People Use Credit Cards

In that location are a one thousand thousand reasons under the sun for why people think they need a credit carte du jour in their wallet. Our State of Personal Finance study institute that 86% of Americans have a credit card. Only on the flip side, 56% of Americans in debt wish they had been meliorate educatedbefore taking that debt on.

Have control of your money with a FREE Ramsey+ trial.

So, with that in mind, why is it so tempting to keep these shiny plastic cards effectually? Here are some benefits (cough, excuses) people make for keeping a credit card or ii:

1. Identity Theft

In the words of Dwight Schrute, "Identity theft is not a joke, Jim." He's correct—dealing with a stolen identity is never a fun situation. And credit card companies know that. That's why they desire you to believe the only way to protect yourself is by making most of your purchases with a credit card. But that's not true!

You lot're protected when you pay with a debit card as well! Under Regulation E from the Federal Reserve, your liability for covering purchases on a stolen debit card is express to just $50 when y'all report information technology right away.¹Andif your debit carte is backed by the credit giants (Visa and MasterCard), you have the verbal protections every bit a credit carte du jour.^2,3

Here'due south the bottom line: If you lot run your debit bill of fare as credit when you make purchases (and skip the pivot number), your debit card is just as rubber equally a credit carte du jour.

2. Emergencies

Life happens. And when it does, information technology can be expensive (with a capital Eastward). You lot know, the heater goes out—in the middle of a snowstorm. The AC fizzles out—on the hottest 24-hour interval of the year. The car won't first—when you but loaded up the family unit for a summer route trip.

One in four Americans with a credit carte use it to cover expenses they can't pay for in greenbacks.⁴ That's a unsafe game, friend. Credit menu companies desire you to see them as the hero coming to save the twenty-four hours. With a swipe of the menu, an emergency becomes less of an emergency . . . until too many emergencies have y'all drowning in debt.

At that place'southward a meliorate way: an emergency fund. Yup, instead of relying on the large credit card companies to save the solar day, you lot tin be the hero of your own story. An emergency fund gives y'all the protection you demand when life happens.

three. Building Credit

You've probably heard somewhere along the way that in order to buy a firm or a motorcar, take out a loan, or actually do any sort of adulting, y'all need to build your credit. And according to research done by Ramsey Solutions, 12% of Americans utilize their credit card to do just that.

It's a popular myth that you won't be able to take out a mortgage or go a competitive interest rate without a proficient credit score. This is exactly what creditors desire you to believe.

Pop quiz. Can y'all name the 5 things your FICO score actually measures?

Debt history
Amount of debt
Length of time in debt
New debt
Type of debt

This "I love debt" score only measures how much debt a person has accumulated over a flow of time. It doesn't mensurate things thatactuallymatter—like salary increases or how much you have in savings. You could inherit a million bucks tomorrow, and information technology wouldn't alter your credit score by one point!

Get this: Paying your regular bills (utilities, prison cell telephone—stuff like that) on time for a long period of time will build your trust and prove you're responsible with money. The right creditor volition take that into account (specially when you're buying a house—but more than on that later).

4. Rewards and Cash Back

Over the years, nosotros've learned that credit card companies are master marketers (ahem, manipulators). Their number one tool of manipulation? Credit card rewards and cash-dorsum offers. The trio of points, miles and rewards might seem like a ticket to easy money, right? Not so fast. One time y'all add up the recurring membership fees and all the interest you lot finish upwards paying, it's but non worth it.

Oh, and did they mention those points also accept an expiration appointment? Probably not—but we will. Every carte has its own prepare of expiration rules y'all might have skimmed over when yous signed on the dotted line. And believe united states of america when nosotros say there's not a millionaire out there who made their millions using complimentary airline miles.

Y'all can't beat the system when you're trapped in a cycle. Start your own system and ditch the cards (that includes store credit cards) birthday. Get on a monthly household budget. Not certain where to begin? Try EveryDollar—our free budgeting app that will help you tell your coin where to go (instead of wondering where information technology went).

Debit or Credit

"I use it only similar a debit card." How many times have nosotros heard this familiar phrase? Sure, this is certainly more reasonable communication than reckless spending . . . in theory. In practise, it tends to become a piffling differently.

When you spend with credit cards, you lot're spending with "hereafter" coin. Since you lot're not paying the moment you lot buy something, it's less painful to purchase something with a carte du jour than with cash.⁵

If y'all don't experience that slight pain when greenbacks leaves your hands, tin you guess what happens ten times out of 10? Bingo! Yous spend more than money.

Using a debit card is the closest matter to using cash since funds are withdrawn directly from your checking account. If you must use plastic (like to brand purchases online or rent a car while you're traveling) make certain it'sactuallydebit. That familiar sting you feel volition cause yous to pay less in the long run—we guarantee information technology. So, in the question of debt vs credit . . . debit is e'er ameliorate.

Can You Alive Without a Credit Card?

A life without credit cards is a life of freedom. Why? Because yous won't get stuck in the revolving bike of credit card beak subsequently credit card bill. Y'all won't take to worry if you've missed your payment. And you won't have to spend your paychecks on old purchases in the form of monthly credit card payments.

Listen, it's possible to live a life without credit cards. Hither are iv tips to help you practise but that:

one. Live below your means.

A life without credit cards is a life costless of debt. Information technology's choosing to live below your means. It's not being swayed by a auction sign and spending money you don't have on stuff you tin't afford.

Certain, it may be fun to get the things you desire right now with money yous don't have. But it'due south not then fun when y'all have to pay interest on information technology later. In that location's a better way . . . It's called living debt-free.

2. Create a monthly upkeep.

We can't stress how important this 1 is. A upkeep doesn't tell you what you tin't do. It gives you freedom to spend freely (within your budget) while coming together your fiscal goals—at the same time. Our favorite fashion to budget is called zero-based budgeting.

What the heck is nada-based budgeting? Well, it's when your income minus your expenses equals zero. And no, this doesn't mean y'all will accept zero dollars left in your bank business relationship. But what it does mean is that you lot'll exist giving every single dollar a chore to practice. Try it out with our free EveryDollar app.

3. Exit of debt one time and for all.

The merely thing that will continue you from being stuck in the cycle of debt is . . . getting out of debt. That means you accept to determine right now that you're done with swiping that card for purchases you can't afford. It means working harder and spending smarter. And it ways getting gazelle intense nigh paying off your debt until you're completely free. Nosotros promise—it's worth it. So worth it.

iv. Salve for emergencies.

You don't demand a credit card for emergencies. You lot can exist your own safety net when you save up an emergency fund.

Start with $1,000—this is stride one of the vii Baby Steps. Keep it in your savings business relationship or a money market account (somewhere you tin can get to information technology easily . . . merely not too hands—like cash nether your mattress). Once y'all're completely out of debt (Infant Footstep 2), build that starter emergency fund upwards to three to vi months of expenses for a fully funded emergency fund (Babe Step 3).

Trust us—the peace of mind yous'll have when an emergency happens is out of this world. Why? Considering you're already prepared. At present, isn't that a nice feeling?

Tin can Yous Buy a Firm Without Credit?

We know you've heard this one before: It's impossible to go a mortgage without a credit carte du jour (and a high credit score). Incorrect! While information technology's truthful that you won't qualify for a traditional mortgage without an active credit account, that's but half the story.

If you've decided to live without a credit carte, that'south awesome! But it doesn't hateful a i-way ticket to renting for the rest of your life. In fact, one of the best ways to purchase a house (without credit) is through a procedure chosen manual underwriting. Manual underwriting is an approving procedure lenders use that takes non-debt aspects of your life similar your employment record, rent history and size of your down payment to determine your eligibility . . . instead of a credit score.

And so, no, it'southward a dangerous myth that yous need a credit bill of fare in club to buy a house. If you lot pay your bills on fourth dimension and have been in the same career field for ii or more years, for example, y'all should have no trouble qualifying for a conventional 15-year, fixed-rate loan.

Do You Demand Credit to Rent a Automobile?

It used to be pretty standard that a rental car and a credit menu went hand in hand. But not anymore. More and more, rental motorcar companies are starting to accept debit cards every bit an accepted grade of payment.

Just not all car rental companies are ready to accept debit cards with open up arms. So, here are some quick tips on renting a motorcar without a credit menu:

1. Find the correct visitor.

When yous're planning your next trip, call ahead and ask auto rental companies about their debit menu policies. You want to find a company that volition permit you drive off the lotwithout flashing a credit card. There are companies out in that location who will actually have debit cards with a smile (instead of the manufacture standard'south usual eye roll)!

2. Research your car options.

Sadly, some rental auto companies may treat their debit bill of fare fans a lilliputian differently than credit carte du jour holders. Don't worry—this just means yous might non be able to rent that exotic sports car you had your sights set up on. But that's okay! Who said traveling economy is bad? But if you really want to rent in style, phone call alee to observe out if the visitor you're looking at will let you rent the car you lot want with a debit carte du jour.

iii. Make sure you meet standard driver requirements.

This one'south pretty uncomplicated. For about car rental companies, that means y'all take to be 25 years old and have a valid driver'due south license. Just make sure you practice your inquiry first. Rules and requirements modify based on what city you're in or even if you lot're renting from an aerodrome location.

4. Be prepared to jump through a few extra hoops.

Non all rental car companies recollect cash is king. And if that'south the case, they'll make you jump through a few more hoops than usual. Some might want to do a credit check and others might inquire you to submit your travel plans. (They but really want to brand sure you're going to give the car back.)

5. Add a budget line item for holds or deposits.

Keeping a regular budget is primal—especially when yous're traveling. Make certain to add a budget line to your EveryDollar upkeep for carte holds or deposits. This is pretty standard for renting a car, no matter how you pay.

Treatment Emergencies Without Credit

Have yous always constitute yourself in a state of affairs where yous didn't take plenty greenbacks to cover an unexpected expense? Of form y'all have. And for 78% of Americans who live paycheck to paycheck, that state of affairs is pretty standard.^{half dozen}

Hither's the reality though: There's no such thing equally a short-term emergency that can't exist paid for with greenbacks. Want to hear the good news? It's never also late to start saving!

Remember that little matter called an emergency fund we told you nigh before? It'due south time to commencement saving your first $1,000—equally shortly as possible (we call this Babe Step i). Then one time you've paid off all your debt (minus the house), you should start building upwards that emergency fund to cover three to 6 months of expenses (that's Baby Step 3). When yous take a large ole pile of greenbacks tucked away, you won't need to reach for the credit carte when an emergency strikes.

Say Cheerio to Your Credit Cards for Adept

Prepare to take the next step? (Hint: It involves a pair of scissors.) Instead of racking up risky credit carte debt and spiraling deeper and deeper into the world of debt, it's fourth dimension to cut those credit cards up for adept. Warning: When you do, you might feel an immediate sense of panic followed by overwhelming peace. You'll feel panic because yous're leaving behind the very thing you've relied on for far too long. And yous'll feel peace because you no longer have to live on someone else's dime. No more minimum payments. No more racking up interest. Only the sweetness, sweet feeling of liberty.

So, now what? We're glad yous asked. Now it'due south fourth dimension to pay off debt faster and live the life you really want. Only you don't have to do it alone. We want to be with you every unmarried stride of the fashion. That's right, from the moment you decide you've had it with living in the cycle of credit bill of fare debt to the moment y'all yell, "I'm debt-free!" later on paying off that same dreaded credit card bill.

How? How? With a membership to Ramsey+. Yup—inside your membership, you'll find the premium version of the earth's best budgeting tool, EveryDollar, andFiscal Peace Academy. You'll learn how to get out of debt and save more money faster. Don't believe us? Try information technology for yourself with a free trial today.

Ramsey Solutions

Nearly the writer