Credit card convenience checks…you’ve probably seen them a time or two. They’re the blank checks that credit card issuers periodically stuff in the envelope with your monthly credit card statements. As their name implies, they’re offered as a “convenient” way to make purchases — simply fill in the amount and sign your name, and the rest is handled by your credit card issuer.
The check is cashed and the amount is added to your credit card balance. Easy, fast, and convenient, right…or wrong? Convenience checks can be tempting but before you decide to use one, here are a few words of warning to keep in mind.
Interest Rates & Cash Advances
Before you cash a credit card convenience check it pays to read the fine print, particularly when it comes to the interest rate and terms. The interest rate is likely the most significant credit card fee you’ll ever pay. Many people assume that credit card convenience checks hold the same interest rate and terms as normal charges made with the credit card. They do not, and this is where not reading the terms beforehand can really cost you.
When you cash a credit card convenience check you can expect to pay as much in interest as you would for a cash advance. We all know that cash advances are usually a bad idea, and convenience checks are really no different. Interest rates on cash advances can end up being twice as much as the regular APR on your card. Read the fine print and make sure you know what you’re agreeing to before you cash that check.
Interest Starts The Minute You Cash The Check
With traditional purchases on your credit card you can avoid paying interest on the balance as long as you pay the balance off in full by the due date. With cash advances and convenience checks the interest begins accruing the minute you cash the check. So, you’re foregoing your grace period.
Even if you’re using the check to make a purchase (rather than writing it out to yourself for cash), it would make more sense to swipe your card so that in the event you do carry a balance, interest wouldn’t begin accruing until after the grace period ends and the balance rolls to the next month.
Check Cashing Fees
If the interest alone isn’t enough to deter you from using convenience checks consider that most credit card issuers also charge an upfront fee for using a convenience check called a “convenience fee” or a “check-cashing fee.” Those fees will end up costing you roughly 3-4% of the amount of the check, and that’s on top of the interest you’re already going to be paying.
The Bottom Line
Credit card convenience checks may sound like a great idea and they’re very tempting but the price you’ll pay for the convenience just isn’t worth it. One last warning: the next time your credit card issuer sends you a nice stack of blank checks, don’t just toss them in the trash bin — shred them first. Otherwise, you’re sending an open invitation to identity thieves and providing easy access to take over your account.