After reading this, we are pretty sure you will agree, the only people for whom convenience checks are convenient are card issuers. They are one the fastest methods credit card companies have devised to saddle your account with a huge balance. Granted, they are convenient for consumers in that they can be used for anything a regular can be used to do, but the ramifications are completely different.
Here is what you need to know about convenience checks:
Cash Advances in Disguise
While it might seem you are charging whatever you purchase with the check, when your card issuers gets it, the company will consider it more like a cash advance. This means the interest rate applied to the transaction will be significantly higher than if you would used the card to buy the item. In fact, the checks can sometimes carry an even higher interest rate than cash advances.
Security Is Lax
When you get a credit card in the mail, you have to call a toll-free number or go online to activate the card. When checks arrive, all you have to do is fill them out, sign them, and present them as payment. And guess what; if they are stolen from your mailbox, the thief can do the same thing. Further, most cardholder agreements say you are responsible for the entire amount of the check, as opposed to the $50 limit applied to a stolen or lost credit card.
They Can Be Denied
The fact you wrote the check does not impose the burden of honoring it upon the card issuer. Read the fine print and you will see they can deny the checks at will. In most cases, they cite the fact that honoring the check will either push you over your credit limit or it will alter your debt to income ratio and render you an unacceptable risk. Meanwhile, whatever you purchased with the check is in your possession. If it is a non-returnable, non-refundable item, you are going to be in hot water.
Perilous Temptation
Having those checks on hand can be exactly the wrong temptation at the wrong time. If you are short on cash one month and need to pay a bill, its way too easy to just write one of those checks. However, that is a classic case of borrowing from Pamela to pay Penelope. You will just be pushing yourself deeper into debt, plus you will have that very high interest rate we discussed above with which to contend.
If you ever find yourself in a situation in which you have to borrow to pay debts, you should hire a company like Freedom Debt Relief to help you get your debts back in line.
Transaction Fees
In addition to the elevated rate of interest that can be imposed, many issuers levy transaction fees against checks. It is a favored tactic, particularly when presenting them as part of a “zero percent” offer. Sometimes, checks come with an offer of no interest charges, as long as the purchase is paid off within 90 or 120 days.
However, what they do not print as large as the offer’s teaser is use of the check will entail a transaction fee. In these instances, even if you pay off the purchase before the period ends, you will still pay more for having used the check.
The Bottom Line
Sure, there are some cases in which convenience checks might come in handy. However, the potential pitfalls far outweigh the benefits. Most experts recommend shredding them the moment they appear in your mailbox. You will save yourself some irritation and you will deny dumpster divers the opportunity to find what is quite literally — a “blank check.”
