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Are Charge Card Account Convenience Checks Really Convenient?

Many consumers receive convenience checks in the mail and regard them as a monetary gift, another source of funds from a special-purpose checking account. Don’t be fooled. Convenience checks aren’t like regular checks attached to a checking account. They are a type of loan, a cash advance against the credit availability on your charge card. Below are 6 reasons why these checks can come back to haunt you.

1. High Interest Rates

Convenience checks usually carry a higher APR than the rate charged for credit card purchases, often in excess of 20%. If there is a low introductory interest rate promotion, read the fine print to understand the promotion time period and what the default rate will be once the period has expired.

2. Immediate Interest Accrual

Interest charges begin immediately after a convenience check is cashed, unlike with credit card accounts where you have a “float” of several weeks before interest starts accruing. In other words, when you buy an item and pay with a charge card account, you don’t pay interest on the amount owed until after the payment due date (if there is a balance). If you buy an item with a convenience check, the APR clock starts ticking when the check clears.

3. Fees

Convenience checks have a transaction fee attached, which can be up to 5%. For example, if you use a check to pay a $1000 bill, you could be charged a $50 fee. Using the check to do a “low interest” balance transfer from a higher interest card could also trigger a transfer fee.

4. Lower Credit Availability

As stated earlier, a convenience check is taking out a loan using the credit availability on your card. If you aren’t sure about the amount of available credit on your card, call the credit card account company to verify the amount before using the check. These days, credit limits can be changed (i.e., frequently lowered), so if your check puts you over your limit, it could bounce or you could be charged over-the-limit fees. In addition, your credit score is closely tied to your credit availability, so if your convenience check uses up most of your available credit, your score will be negatively affected.

5. Less Protection

According to the Fair Credit Billing Act, consumers have certain protections against defective goods when making purchases with a charge card. These protections don’t apply when you use a convenience check.

6. Temptation for Thieves

If you receive convenience checks in the mail and you aren’t tempted to use them, realize that other people might be tempted. Leaving blank checks around will invite theft, so shred the checks to avoid being on the hook for someone else’s spending spree. Studies have shown that most cases of identity theft are caused by a friend or family member.

In short, don’t use a convenience check unless you understand the terms and know all of the potential consequences. Otherwise, these checks can be truly inconvenient.

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