Have you ever been surprised to find blank checks in the envelope with your monthly credit card statement? Well, these are known as credit card convenience checks, and true to their name, they are a convenient way to access cash quickly by borrowing against your line of credit. But like with all things that appear “convenient,” there is a catch: owing to high interest rates and fees, they cannot be all that convenient!
If you’re unfamiliar with this, you’ve come to the right place. Let’s break it down so you can understand everything you need to know about credit card convenience checks.
What Is A Convenience Check?
These are blank checks that lenders offer to their customers. These lenders are typically credit card companies or home equity line of credit providers. Borrowers use these checks to settle their balances on other cards, secure cash advances, or make a new purchase.
However, since these are not bank checks, they are subject to terms and fees. The terms depend on the lender’s structuring and the borrower’s usage. So, it’s paramount that the borrower takes the time to carefully read the fine print before using convenience checks.
How Does It Work?
Convenience checks are bound to a loan; accordingly, you must repay the money with interest. They allow borrowers to gain credit extended by their lenders through additional channels.
Convenience checks serve three key purposes. First, they allow borrowers to make a purchase when a check is required or accepted. Second, they facilitate a balance transfer, and third, they will enable the borrower to get a cash advance from the lender. Convenience checks come with additional terms. In some instances, the funds accessed may be part of a promotion that offers an interest-free rate over a limited period.
At the same time, convenience checks come with an additional fee, usually known as the cash advance fee. The terms depend on the nature of the transaction and the agreement with the lender.
These checks could be mailed to customers as part of their marketing program, but some customers may have to place a request from the lender. Borrowers can opt out of getting them if they don’t plan on utilizing them.
Before you choose to sign your name to a convenience check, educate yourself on the following:
Cash Advance APR
Remember, the interest rates on cash advances are usually much higher than the credit card’s regular APR. If this is not stated on your check, read the “Rates and Fees” section on your credit card’s website to understand what you would be paying in interest.
Cash Advance Fees
Borrowing against your credit card’s line of credit through a convenience check would mean an additional fee. For example, if the fee is 3% and you want to borrow $1,000 using the check, you must pay $30 for this service, along with a higher interest rate.
Grace Period
The grace period for using your credit card for purchases is usually between 21 and 25 days before the interest charges kick in. However, with convenience checks, the interest charges will begin to accrue immediately!
Pros Of Using Convenience Checks
- They can be used to pay vendors who don’t accept credit cards. For example, if you need your car repaired urgently and the mechanic doesn’t accept cards, you can write a check out to the repair service.
- They provide quick access to cash, unlike applying for personal loans, which takes time.
- They can be used to settle a critical bill or payment due before your next paycheck, and you’re on a cash crunch.
Cons Of Using Convenience Checks
The pros mentioned above come with a considerable cost in the long run. Some of these include:
- Fewer legal protections for purchases.
- No grace period is provided.
- They are highly likely to incur cash advance fees.
- They are subject to potential APRs.
The greatest risk when using convenience checks lies in the fees associated with the procedure. Moreover, handling the transaction correctly can take a lot of time.
A convenience check should only be used as a last resort and only when you have a solid plan for quick repayment to avoid paying exorbitant interest charges. If you choose to go ahead anyway, remember that this might be the most expensive way to use your plastic due to the steep interest rates, enormous fees, and no grace period.
Owing to these reasons, you might consider some other options, such as:
- 0% intro APR credit card offers.
- Personal loans.
- Lines of credit or home equity loans.
Bottom Line
Of course, convenience checks are very tempting, so if you feel you might give in to that temptation at one point, then play it safe by opting out of convenience checks. It’s worth remembering that convenience checks aren’t free money; they are far more expensive than your regular credit card transaction. To avoid the chance of the convenience check falling into the wrong hands, shred them up or write “VOID” on the front because a thief can quite easily draft the check for their benefit.
