Just How Expensive Are Convenience Checks?

As a cardholder, you’ve probably received those infamous “convenience” checks in the mail along with the statement from your card issuer. These checks are usually accompanied by a letter that might state that the checks they are providing are for you to use to “pay down other debts” or “consolidate your outstanding credit card balances”. It may seem like a great offer as a loyal customer but in reality – convenience checks carry significant risks and costs and are usually far from convenient.

What’s The Deal with the Checks?
Who wouldn’t love a blank check to be at their disposal when they need it? Of course, it is that logic that draws many people into the notion that with those blank checks comes an easy way out. As we all know, there is very little that is truly free in this world and those convenience checks come with a frightfully expensive price tag – you could end paying for them down the line for many years.

The reality is that when you cash a convenience check or use one to pay another one of your bills, you are essentially taking a cash advance from your credit card. Cash advances on a credit card hold a much higher interest than the standard interest rate for purchases. Interest rates for cash advances are usually 20% or more. So while it may seem like a great idea to pay off other debts using this so-called ‘convenience’, consumers should definitely consider the true cost of these checks. There is no grace period for cash advances so interest charges start accruing immediately. In addition, transaction fees usually always accompany the use of the checks as well. All of this added up can be a lot more than most people bargain for.

The Dangers of Convenience Checks
While they are connected to your credit card account, with convenience checks you do not get the same incentives or protections that go along with your credit card. In situations where merchandise you purchase on your credit card is damaged or stolen, you will likely find it easy to get a replacement item. But convenience checks do not offer the same purchase protection, so should a problem arise, you are on your own to battle the merchant. Another danger involves the way these checks are delivered. Card issuers typically send them with the customer’s card statement, opening up the possibility of the checks being stolen from the mailbox and very easily used without your permission.

Not So Convenient
Since a large majority of people no longer use checks to pay for anything, it can sometimes be difficult to use checks to make ordinary purchases. Card issuers also have the right to refuse payment on any check for any reason. In the event you send a check to pay off your car note and it is refused, you will face bounced check charges and the possibility of penalties and fees from your financing company. Last of all, convenience checks do not offer the same rewards or “points” that are offered through use of most rewards credit cards.

Unless used for the most dire of circumstances, convenience checks are not worth the expense or the trouble they can cause in most situations and should be avoided.

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This entry was posted on Tuesday, September 15th, 2009 at 3:55 am and is filed under Debt & Consolidation, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.