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Understanding Convenience Checks

Every so often, your credit card company may send you a few blank checks in the mail with your statement. You can use these checks to make a purchase like you would with a personal check or credit card. However, using these checks can come with their own heavy costs just for using them. These are convenience checks and it’s important to know exactly how they work before you decide to use them.

What Is A Convenience Check?

Convenience checks, also known as credit card checks, come from your credit card company, usually alongside your credit card statement. They look similar to personal checks and you sign, date and use them in the same way. However, they actually operate pretty differently.

How a Convenience Check Works

Understanding Convenience Checks

When you use a convenience check to buy something, the money is deducted from your available credit. This is unlike a personal check, where the funds come directly from your own account. Using a convenience check uses your credit, which means the bank pays the merchant. You then pay the bank back for the amount when it appears on your credit card statement. You may also use a convenience check to snag a cash advance. To do this, you write the check to yourself and cash it. Again, you’ll have to pay that amount back at some point.

No matter which way you use a convenience check, you’ll find yourself paying a price for its usage. For one, both uses are treated as a credit card cash advance, which often comes with fees. This fee usually charges from 3% – 5% of the amount.

The more dangerous part comes when you have to pay back the amount. Cash advances usually carry their own interest rate. These rates are often much higher than your standard purchase interest rate. Plus, cash advances begin accruing interest almost immediately after the transaction clears, offering no grace period to pay it off.

It’s important to note that convenience checks do affect your credit limit. It’s easy to think that a blank check is good for any amount of money, but that’s not the case. To keep your debt-to-credit ratio healthy, you should use a maximum of 30% of your available credit each month. So if you have a credit limit of $5,000, you should use only about $1,500 each month. If you’re using your credit card regularly, that limits how much you can spend with a convenience check. You definitely want to make sure you don’t use a convenience check if it will push you over your credit limit. If that happens, the check will bounce, leading to more fees and a hit to your credit score.

When to Use a Convenience Check

Understanding Convenience Checks

Convenience checks can sometimes come with a promotional interest rate offer, working as an incentive to get you to use them. This offer can be something like 0% APR for four months. This kind of deal would give you four months to repay the check amount without accruing interest. You will, however, still be charged a transaction fee.

Paired with a promotional offer, convenience checks do prove to be convenient in certain situations. For one, it could come in handy when you need to make a big purchase and want to pay it in installments. With the example offer above, you would have four months to pay off the big purchase before the amount grows due to interest. You just have to make sure you understand the terms of the promotion. This includes knowing exactly how long you have to pay off the charge before interest kicks in.

You also may want to take advantage of this combo if you have another credit card balance you need to get rid of. This works like using a balance transfer credit card to pay off another card’s balance. However, instead of using the low APR of the balance transfer card, you would pay off the balance with a convenience check. Sticking with the above example, you would then have four months to pay off that amount at 0% interest thanks to the convenience check promotion. Again, first make sure you understand the convenience check’s interest rate and transaction fees.

The Bottom Line

Convenience checks can be useful in certain situations, but must always be used with caution. You’ll have to pay a transaction fee every time you use one and each check begins accruing interest on the day you use it. Typically, it’s best to only use a convenience check if it comes with a promotion period. Then, you just have to make sure you know the length and terms of the offer. It can help to call your credit card company before using a check to make sure you use it responsibly. If you choose to not use them, you’ll want to shred them to prevent fraudsters from potentially using them.

Tips for Using Your Credit Card Responsibly 

  • It can be easy to see your credit card as free money since the funds aren’t immediately taken out of your bank account. However, you do have to pay all that back at some point. This is why it’s so important to spend only what you can truly afford when using a credit card. That prevents your account balance from growing and accruing more and more interest. That’s how consumers fall into credit card debt.
  • If you don’t have a credit card yet, it’s important to find the right one for you and your spending habits. For example, if you spend most of your money on travel and dining out, you should find a cash back credit card that earns money when you spend on travel and dining out. You’ll benefit best with that card rather than a card that earns most for grocery purchases.

Photo credit: ©iStock.com/YakobchukOlena, ©iStock.com/YinYang, ©iStock.com/AndreyPopov

Danielle Klimashousky Danielle Klimashousky is a freelance writer who covers a variety of personal finance topics for SmartAsset. She is an expert on topics including credit cards and home buying. Danielle has a BA in English from Wesleyan University.
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