Convenience Checks – Are they Really Convenient?

Does your credit card issuer send you the blank “convenience checks” along with your statement? If so, do you use them or just throw them away? Either way, be careful! Those convenience checks can be both costly and risky. Convenience checks can be used in several ways. They can be written as payment to a merchant, to a friend or family member, or even to yourself to deposit in a bank, perhaps for use later. If you are considering using them, you need to be aware of the costs. First, there are the fees. You will incur a fee of from 2 to 5 percent of the amount of the check just for writing it. Depending on the card issuer and terms, the fee imposed could be a minimum of about $5 or a maximum of up to $300. The costs don’t end there. The interest charges on convenience checks begin immediately and will be similar to that for a cash advance, usually 20 to 30 percent. To find out what interest rate will apply, look at the information sent with the checks, your credit card terms of agreement, or your credit card statement. At least until February 2010, when this provision of the Credit CARD Act of 2009 takes effect, the credit card company is allowed to apply any extra payment over the minimum amount first to the lowest interest rate transaction which usually will be the new purchases. In other words, you won’t be paying off the loan until all lower interest rate transactions have been paid off first. Typically that means that it won’t happen until the total account balance has been paid. The new law requires that the additional payment is allocated to the balance with the highest interest rate. If the convenience check amount causes you to exceed your card’s credit limit, the card issuer might not honor the check. This could, in turn, trigger an overdraft fee from your bank or from the merchant and over-the-limit fees from the card issuer. Furthermore, exceeding the credit limit may cause your interest rate to go up resulting in higher payments for your balance you are already carrying. Convenience checks have many risks. When using your credit card, you have protections from unauthorized use or problems with unsatisfactory merchandise under the Fair Credit Billing Act. Not so with a convenience check. Because there is no signature verification, if the convenience checks are lost or stolen, there is no protection. The thief can go shopping wherever they like at your expense. Using a credit card, you have 60 days to dispute an unauthorized charge and are liable for a maximum of $50 per card. The $50 can be covered by your homeowner’s or renter’s insurance with no deductible. Some card issuers, however, have undertaken some protective measures such as requiring the user to call a toll-free number to activate the checks. To protect yourself from potential identity theft, ask your credit card issuer to stop sending them to you if you don’t think you are likely to use them. You can find the phone number on your latest statement. There may be times when the convenience checks are convenient for some consumers, but it is essential to know the costs and risks involved when using them. Otherwise, don’t get them.