Convenience Checks: 6 Reasons Why They Can Cause Trouble

By Hollis Colquhoun. Last updated 31 March 2010. 8 comments

Many people 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 credit card. Below are 6 reasons why these checks can come back to haunt you.

1. High Interest Rates

Convenience checks usually carry a higher interest rate 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 cards where you have a "float" of several weeks before interest starts accruing. In other words, when you buy an item and pay with a credit card, 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 interest rate 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 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 credit 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.

This is a guest post by Hollis Colquhoun. Hollis has over 20 years experience in the financial industry, is an Accredited Financial Counselor and co-author of Women Empowering Themselves: A Financial Survival Guide. Contact her at Women Empowering Themselves. Here are more articles by Hollis:

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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Guest's picture

Many credit card companies treat convenience checks differently than balance transfer checks.

For instance, the convenience checks are often subject to your credit balance available for "Cash Advances". Balance transfers are usually subject to your total credit limit.

As mentioned in the post convenience checks usually have a higher "cash advance" interest rate, while balance transfers usually revert to the standard rate on the card if the promotional rate expires.

Check with your credit card company to check the details of your offer to make sure you are getting what you think you're getting.

Guest's picture

Shred them right after you take them out of the envelope! I'm always so annoyed that these things keep coming in the mail--because they absolutely could be used by someone other than you! And you really have no financial incentive to use them. They're a bad bet.

Guest's picture
Q

I have never used these, but I receive them all the time. It freaks me out how easy it would be for someone else to get a hold of them! Is there any way to get a credit card company to stop sending these? It just seems like a huge security risk.

Guest's picture
downfall

I got a balance transfer check from Discover that offered me the low rate of 5%... with a 3% charge. And the 5% rate was only good for six months. So, essentially, it only makes sense to transfer if you have debt at above 11% interest but you can pay it off in six months. That can't be that many people. I wonder how many people who got the same letter actually estimated the real interest rate.

Guest's picture
Kathy F

I called my credit card company and asked them to stop sending them and they did. I was not using them and they created another paper mess I had to shred. Also, mail gets misdelivered frequently in my hi-rise building and I don't want them to end up in some one else's mailbox.

Defintely shred them if you don't use them. I once found a neighbor's blank balance transfer checks in thrown away mail in a garbage bag in the trash chute room on my floor. I was seeking evidence to make a complaint about someone not putting their trash down the chute and instead just dumping in on the chute room floor, blocking access for others.

Guest's picture

@ Kathy F -- good tip on calling your CC company to get them to stop sending them. Hate these things. Seems so easy for them to fall into the wrong hands. You can pretty much tell what they are by the envelopes.

Guest's picture
BD

Oh man, #6, all the way. I HATE convenience checks, for the very reason that it's easy for thieves to take steal them right out of your mailbox and use them. I had that happen to me years ago. Thieves stole my mail out of my box, and used the convenience checks against my credit card for over $2,000. Luckily, I caught the theft right away, and disputed the stolen charges. The credit card company dropped the charges, but the damage was done. It was then I learned to ALWAYS call the credit card companies ASAP and have them stop sending convenience checks.

Guest's picture
EM

If you're shredding a blob of "convenience" checks every month, call and request that they not be sent. Call the customer service number on your card, make your way through the phone tree, and simply ask that they not be sent. Yes, it's a request they can accommodate. I've done it.