What you need to know before you write that check

The Dangers of Convenience Checks

by Bill Hardekopf

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It is very common to receive convenience checks from your credit card issuer. These promotional checks look like free money, with 0 percent offers in bold print. These offers may seem like a tempting way to pay for holiday shopping, but consumers need to read the fine print to know exactly what you are getting.

The convenience check is linked to your credit card account. The promotional letter describes the checks as an easy way to get cash, transfer balances, or make a purchase that you have been putting off. It all can be yours if you just sign the check. But these convenience checks can be a very costly way of borrowing money.

  • There is a fee for using these checks, usually 3 to 4 percent of the check amount.
  • These checks sometimes have a higher interest rate than the APR on your credit card. Typically, you will be charged the interest rate for a cash advance, often above 20 percent. In some cases, there may be an introductory offer with a special low interest rate on these checks. Read and understand exactly how long this promotional period will last before these higher APRs begin to take effect. After the intro period is over, you may save money by transferring your balance to a credit card with a lower interest rate.
  • There is no grace period with convenience checks. If you transfer a balance to the account or purchase an item with a convenience check, you will be paying interest immediately.
  • Purchases with these checks normally do not earn rewards.
  • Convenience checks do not give the same purchase protections as a credit card.
  • Before you use the promotional checks, check your outstanding balance, including transactions that haven't posted. Your checks, transactions, and fees can't exceed your credit limit. Exceeding that limit will pull down your credit score. If you go over your limit, your card issuer might not honor the check. You might end up paying returned-check fees to the merchant as well as over-limit fees to the card issuer.
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  • Look for the expiration date. The check must be posted to your account by the designated date for the promotional APR to apply. If you use the checks after the date, the issuer may still honor the checks, but you will receive the interest rate for a purchase, not the promotional APR.

If you know you will never use the checks, open the letter from your credit card issuer and shred the checks to protect yourself from the possibility of fraud. If you desire, you can call your credit card company and tell them to stop sending the convenience checks.

Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

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