When to Use Credit Card Convenience Checks

Credit Card Convenience ChecksIf you have a credit card and manage it responsibly, you’ve undoubtedly received credit card convenience checks in the mail. They’re periodically sent by credit card issuers – but are especially common during the Holidays. You can use credit card convenience checks for any purpose, from paying your mortgage or car bill to making a big ticket purchase. The idea is to give you more flexibility in using your credit card account, but before you hastily choose this payment option, be aware that CONVENIENCE CHECKS ARE NOT FREE. In fact, the cost of using convenience checks can be substantial, so it’s important for you to understand the pros and cons before you sign on the dotted line.

How Convenience Checks Work

Convenience checks look just like regular checks and can be quite enticing, especially if you’re strapped for cash. They work in the same manner as a regular check, but rather than taking money from your checking account, convenience checks are tied directly to your credit card and increase your credit card balance instead. Credit card companies often send five or six convenience checks
at a time throughout the year. They have expiration dates and can be used within the allotted time frame to write a check for any amount – up to your available credit limit.

Convenience Check Sample

The Worst Case Scenario

When you write a convenience check, you’re basically taking out a cash advance on your credit card. Unless you’re offered a promotional 0% APR, this purchase is subject to the cash advance rate, which is typically much higher than your normal credit card interest rate – often as high as 24.9%. There is no grace period and interest accumulates immediately after the check is processed. Plus, there is also a cash advance fee – about 4% of the purchase amount.

Pros of Convenience Checks

With that being said, there are a few situations where a convenience check may be worth considering:

  1. Transferring a credit card balance: For consolidating credit card debt, it often makes sense to use a convenience check for transferring the balance from one credit card to another. By using a balance transfer, you may be able acquire a lower interest rate and save money. Fortunately, convenience checks used for balance transfers ARE NOT subject to a cash advance rate. However, there may be a balance transfer fee (3% on average) that needs to be taken into consideration. When used in combination with a 0% introductory APR, transferring a balance with a convenience check is a wise decision, especially if you have a large balances and pay a high APR on your existing credit card balances.
  2. Use where credit cards aren’t accepted: If you’re working with a contractor or purchasing from a business that doesn’t accept credit cards, a convenience check can be used if you don’t have cash. Of course, this is an expensive way to pay, so if you must go this route, it’s important to pay down your balance as quickly as possible and avoid excessive interest charges.

Cons of Convenience Checks

We’ve already discussed some of the downsides, but here’s a complete overview of cons of using credit card convenience checks:

  1. Much higher interest rates: If you write a convenience check for anything other than a balance transfer, you’ll pay a much higher interest rate than normal – and with no grace period. You will incur interest the same day as your purchase.
  2. Unavoidable fees: Whether you use a convenience check for a cash advance or a balance transfer, you will be charged fees. Fees are typically a percentage of the check amount, 4% on average, with most creditors charging a minimum fee or a percentage – whichever is greater. The less you borrow, the lower your fees.
  3. Less purchase protection: With normal credit card purchases, the Fair Billing Credit Act offers consumers a variety of protections. Unfortunately, most of these protections do not extend to purchases made with convenience checks.
  4. Risk of identity theft: Just like regular checks, convenience checks include important account information and loosing them could increase the risk of identity theft. Even worse, they could easily be plucked out of your mailbox or garbage can, so don’t let them sit around too long and shred any unused checks before you throw them away. If you don’t ever plan on using convenience checks, opt out of receiving them by contacting your credit card company.
  5. Impacts to your credit score: Anytime you increase the balance on your credit card, it lowers your available credit. Ideally, your credit card balances should not exceed 30% of your credit limit or it will have a negative impact on your credit rating.

Credit card convenience checks should be approached with caution. With the exception of transferring an existing, high-interest credit card balance, you’ll pay abnormally high cash advance rates and it’s very hard to justify the cost – UNLESS IT’S AN EMERGENCY. Without a 0% introductory APR, I would personally avoid convenience checks entirely since you could easily apply for a new 0% APR credit card to maximize your savings. Even with a 0% APR, a balance transfer fee will still apply, so be sure to weigh the overall savings of paying 0% interest with the cost of the balance transfer.

* See a complete list of 0% APR credit cards at: www.wowcreditcards.com/0-apr/

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