Are Convenience Checks a Good Idea?

What are convenience checks?  They are the checks you receive periodically in your credit card statement, also known as credit card checks.  When you use these checks the amount will be added to your credit card balance.  They usually offer a low interest rate for an introductory period and the check is good for between 60 to 90 days. The credit card issuer wants you to use the checks to make purchases or take cash advances to build up your balance.  Many credit card issuers push the checks as a way to pay off bills or other credit card balances.  They want their card to be number one in your wallet, of course.

Read the fine print

These offers are very, very tempting and can act as the crack cocaine of the credit card world if you’re not careful. The best use of the convenience check with a low interest rate is to pay off another credit card account at a much higher interest rate. You must do so during the lower-rate promotional period, before the rate changes.  Study the terms and conditions of a convenience check offer carefully, and read the fine print. The terms may not be as attractive as you think. In some situations, you begin paying interest immediately rather than after a grace period. There may also be a cash advance fee of up to 3 percent added.

Check your credit line

You do not have the same credit line for cash-related advances as you do for charges.  The issuer may allow a certain amount of your credit limit for the checks. Call the credit card issuer and double-check.  Using more of your credit limit can impact your credit score depending how much of it you have used.

If you don’t use the checks, they should go immediately into your shredder. Tossing them in the garbage is an invitation to (account takeover) identity theft. It’s like tossing your credit card in the trash without shredding it.

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A friend of mine refers to convenience checks as the crack cocaine of the banking industry.  I’ve used that term often, because for some consumers it’s 100% true.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.