Have you ever received blank checks with your monthly credit card statement? These credit card checks provide access to your line of credit to get quick cash or make a purchase. Convenience checks, as they’re called, provide ease of use, but like with anything tied to a credit card, it’s important to know how they work and the potential costs involved. We discuss how to use convenience checks and if they’re a good resource to use on your financial journey.
What are credit card convenience checks?
Convenience checks are blank checks mailed to you by your credit card company. The checks effectively operate as a form of cash advance. Rather than swiping your card, you can use the convenience checks at any retailer that accepts checks.
Issuing banks typically mail the checks throughout the year to provide another means for users to access available funds. Even if you opt for paperless billing, it’s common for credit companies to send convenience checks. Dispose of the checks properly, such as shredding them, to avoid an unauthorized user accessing them. If you never plan to use the cash advance checks, ask the bank not to send them.
How do convenience checks work?
Credit card convenience checks may seem harmless, but that’s not the case. If you use one of the checks, you will borrow funds against your line of credit as these checks effectively act like a loan.
While you can use them at any retailer that accepts checks, they operate like a cash advance. That’s important to know for two key factors: the amount of the check starts accruing interest immediately and you’re charged the APR for cash advances, which is usually higher.
You may also incur a fee for using the check. With the added interest and possible fees, it’s easy for regular usage of convenience checks to lead to debt.
You may see offers of balance transfer checks to pay off debt on one card with the credit line of another. However, balance transfers have largely moved online or can be done over the phone. It’s typically best to pursue either route before using a check.
What are the pros and cons of convenience checks?
Before using a credit card convenience check, it’s imperative to know how they operate. These are some benefits of convenience checks:
Easy access to cash: If you need quick cash, you can use checks to get money. Rather than using an ATM to get a cash advance, you can make a check out to yourself instead of taking a personal loan.
You can make purchases: You can use convenience checks at any retailer that accepts checks. This isn’t a rewards-earning opportunity, but it works in a pinch if you can’t access your card.
Simplifies balance transfers: Consolidating debt with convenience checks is possible if you want to transfer balances from one card to another. However, it’s likely to incur fees.
The benefits aside, there are some important risks of convenience checks to consider. Those include:
Zero grace period: Convenience checks don’t offer the same grace period as purchases. Like cash advances, you instantly begin accruing interest. Worse yet, the APR for convenience checks is commonly more burdensome.
No purchase protection: Purchase protection is a significant advantage to credit cards. You forfeit that perk with convenience checks.
High costs: Credit card companies often charge a fee to use such checks. Add that to the heightened convenience check interest rates and it makes the accessibility expensive.
Alternatives to convenience checks
Paying bills with convenience checks may seem like an easy way to manage a budget. Unfortunately, they can become costly. Here are some alternatives to credit card convenience checks to consider.
Balance transfer cards: Managing debt with these checks may seem simple, but it comes with onerous convenience check fees. A 0% APR balance transfer card can be a better option. Some cards are available that offer no interest on transfers and purchases for up to 21 months. Just make sure to repay the transfer before the promotional period ends, or you may have interest applied to your card for the entire period.
Personal loan: If your credit is in fine shape, a personal loan may be a better choice. Some loans may have lower fixed interest rates that could save you money in the long term.
Home equity line of credit (HELOC): When considering HELOCs vs. convenience checks, it’s vital to do the math. If the former is cheaper, it can be a good alternative. Keep in mind that this option does put your home at risk if you miss payments.
Frequently asked questions about credit card convenience checks
Accessing cash with convenience checks may seem like a great way to manage a budget. While that may be true in some cases, that doesn’t paint the full picture. Here are some questions cardholders have before using the tool.
What is the impact of convenience checks on credit scores?
Convenience checks don’t directly impact a credit score. Indirectly, using them can increase your credit utilization ratio, which does impact your credit. Combine that with the fees and high interest rates on convenience checks, and it can be a costly endeavor through regular usage.
Are convenience checks safe?
Yes, credit card convenience checks are safe to use. But, they do provide direct access to your line of credit. If you receive them and don’t plan to use them, it’s best to shred them to avoid someone using them fraudulently.
Do you earn rewards on convenience checks?
Unfortunately, you don’t earn rewards when using convenience checks. Rewards are only earned when making purchases with your credit card.
The bottom line – Are convenience checks a good idea?
Convenience checks may seem like a good way to access cash when you’re in need or unable to use your card. That is commonly not the case. The cost of convenience checks often makes them a burdensome option, particularly with frequent use.
