Most credit cardholders regularly receive credit card convenience checks in the mail. Like every other financial instrument, convenience checks have their use. However, it’s important to evaluate the pros and cons before using convenience checks to make sure you don’t end up paying a lot for a little.
Convenience checks come in two forms. Most credit card companies regularly send out cash advance convenience checks to encourage cardholders to take out cash advances. Other convenience checks come with promotional balance transfer offers, which can be used to pay down other credit card balances with higher interest rates or even for purchases.
It is easy to become confused about how the money you take out using convenience checks will be treated by the credit card company. Once you know what to look for, however, it’s quite easy to see which checks will be treated as cash advances and which as balance transfers. Here is a simple rule of thumb: Unless there is a promotional APR clearly printed on the check stubs and in a prominent place in the cover letter, the check will be treated as a cash advance.
Credit card companies state the promotional balance transfer offers very clearly, because they want you to know about the offer. They don’t advertise that a convenience check will be treated as a cash advance, however. Why? Because when consumers use a “regular” cash advance convenience check, card issuers stand to gain big time. They not only earn money on the cash advance fee charged when the check is cashed (3-5 % of the amount cashed), they also get to charge the high cash advance APR on the amount of the check. The cash advance APR runs as high as 22.99%, often 5-10% above the purchase APR. Even better (for card issuers, that is), there is no grace period on cash advances, so once the check is cashed, credit card companies will start charging interest from day one.
In short, what you might think of as a convenience-and it is meant to seem that way-is really a sweet deal for card issuers. So, should you stay away from convenience checks altogether? Certainly, using convenience checks that amount to simply taking out a cash advance is a losing proposition for consumers. However, if the convenience check comes with a great promotional balance transfer offer, and you’re in the market for a balance transfer, convenience checks can be worth a look.
Using convenience checks for balance transfers can sometimes be advantageous. Some credit card companies send out their best balance transfer offers to select cardholders via convenience checks. So, if you’re looking for a balance transfer deal, check the mailed convenience check offers too. Secondly, some credit card companies still offer a cap on the balance transfer fee. If you’re looking to transfer money to pay down several high interest credit cards, you can save quite a bit by depositing a convenience check in your checking account and then write checks from that account to pay off the other credit card balances. That way, you’ll only be charged a balance transfer up to the maximum fee of e.g. $75. On a $10,000 balance transfer offer with a 4% transfer fee, that would mean a $325 savings. For more tips, see this article on how to make a credit card transfer using convenience checks.
If you prefer to not receive convenience checks from your credit card company, you do have the option to opt out of their program. Simply request to be removed from the program through a phone call or in writing.
