Credit Card Convenience Checks

Published: 18th November 2008
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Convenience Checks

Anything that has "convenience" in it name should signal that you're going to pay for that convenience. Convenience foods save time and cost more because of it, convenience fees are added to online purchases for concert tickets, and convenience checks are one of the most expensive ways to access your card's credit line.

If you have a credit card, chances are that you've already received some of these convenience checks; they're often mailed to you without you even asking for them. The card issuer tells you that you can use them for anything, and you can pay anyone with them. Well, yes, it's true.

But before you use one of those convenience checks to pay your nanny, your landlord, or even yourself, take the time to find out what it will cost you. Those blank checks may be tempting to use, but it's usually a big mistake to take them up on their offer.

Convenience checks are more expensive than using your card for purchases

Convenience checks are considered to be cash advances, and carry the higher cash advance rate of anywhere from 18% to 21% APR, or even more. There is often a fee of 3% to 5% on top of the APR, and may have a minimum charge of anywhere from $10 to $25. Also, there is no grace period on cash advances, including those accessed by a convenience check. Interest will begin accumulating as soon as the check is used.

It may take a long time to pay off a convenience check purchase at a higher APR because most credit card issuers will apply your payments to the lowest-interest charges first. For example, if you carry a balance of $1000 at 12% APR and use a convenience check for $1500 at 20% APR, all your payments will go towards the 12% debt until it's paid off. All the while, interest will continue to accumulate at 20% on the $1500 check purchase. Very bad news if you normally carry a balance.

Some card issuers will give you a promotional rate or an interest-free period, or use a number of other tactics to encourage you to spend money on credit. They may encourage you to use your convenience checks to pay off other debts or to transfer balances from another credit card. While an interest-free period may work out to your benefit in a balance transfer, keep in mind that there is likely to be a balance transfer fee of 3% to 5%.

Also, keep in mind that card issuers' "pay the lowest-interest balance first" policy can work against you if you carry a balance and use a zero-interest convenience check. Let's say you have a current balance of $500 at 12% APR. You think you're getting some interest-free time with a convenience check and decide to splurge on a cruise for your family for $2500. Your payments will only be applied to your interest-free balance until your vacation is paid off, all the while your $500 balance continues to grow at 12%.

Read the entire document, including the teeny-tiny print, to get all the details. If the interest rates aren't included with your convenience checks, you may have to call your card issuer to find out.

Convenience checks don't give you as much protection as a credit card purchase.

The nice thing about credit cards is that your card issuer will help you by dealing with the merchant if there's a dispute about the merchandise; convenience checks don't offer the same kind of protection. You may just be out of luck if you buy something with a convenience check and it breaks the next day, or if you order something and don't get what you thought you paid for.

You can still dispute a purchase if it was made with a convenience check, but your card issuer really has no obligation to help you out. Credit cards gives better protection, brought to you by the Fair Credit Billing Act.

If your convenience checks end up in the wrong hands, they can provide a thief with access to your credit card account.

With convenience checks sent to some households with every billing statement, there's bound to be some checks that end up in the trash with the junk mail - a perfect opportunity for dumpster-diving crooks to cash in on your credit line. Treat those convenience checks just as you would any of your other private information; safe-guard them or shred them.

You can try calling your card issuer to ask them to stop sending them if you're afraid of someone stealing them. Your card issuer may honor your request, or they may keep sending them in hopes that you can no longer resist their offer. At least it's worth a try.

Resist your card issuer's attempt at getting you to spend more.

A credit card is accepted at nearly any merchant, but card issuers want to make sure you have a way to pay for things that you can't with a credit card. So, convenience checks are the next weapon in their arsenal of "getting you to spend more". Card issuers want to make sure you have as many options as possible in accessing your credit line - like having only a credit card isn't temptation enough to spend. The more ways you have to run up your balance, the more ways they have to make money. Just make a smart decision in your use of credit, whether your spending is by charging it on your credit card or by using a convenience check.


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