What is a Convenience Check
Convenience checks are blank checks that that credit cards companies send to customers. The cardholders can use these checks to pay off balances on other cards, make new purchases or to secure a cash advance. These are not bank checks, though, and they come with a special set of fees and restrictions depending on how the cardholder uses them. Cardholders should read the find print carefully before using them for any purpose.
BREAKING DOWN Convenience Check
Convenience checks are a marketing tool aimed at providing a credit card holder an additional channel through which they can access the credit extended by their card issuer. The cardholder can generally use these checks for any of three purposes: they can make new purchases, pay off a balance on another external card account or get a cash advance from the card issuer.
The checks often come with an enticing offer attached. The most common offer is a zero percent interest rate. This rate can, depending on the specifics of the offer, be applied to any of the three transaction types described above.
Cardholders have the right to opt out of marketing offers such as convenience checks, whether the offers come from their existing card issuers or other companies. Consumers can call the company to decline future offers, and can register with credit agencies such as Equifax. The agencies should then notify card issuers not to send marketing materials to registered individuals.
Risks of Using Convenience Checks
Why would a consumer want to opt out of offers such as convenience checks? These offers may seem like easy, low-cost tools to access better sources of credit. This is especially true when a promotional offer tells the customer that the transaction will be subject to a zero percent interest rate, which is often how the offer is framed.
In fact, there may be any of a variety of unexpected costs involved. First is the set of fees that many banks charge on a cash advance. A cardholder using their convenience checks to pay off a balance on a second card account, in essence transferring that balance to the first card, may be subject to such fees, and they may be two-part fees. First is the one-time cash advance fee which is generally between 3 and 5 percent. Second is the annual percentage rate (APR) on that additional balance, which can be as high as 20 percent.
A second fee-related factor that the cardholder should be aware of with relation to convenience checks is the grace period that most cards grant on regular purchases. A cardholder who is up to date on their payments is generally exempted from interest on purchases until that month’s payment is officially overdue. That due date can be almost two months after a purchase date. In contrast, a cardholder who carries a balance is no longer granted the grace period. Many cards that offer convenience checks choose not to offer a grace period on balance transfers or purchases made with those checks.
As with any unfamiliar credit card transaction, the cardholder is wise to read the fine print and, most importantly, pay off their balance every month. If they do so, a convenience check can indeed be a convenience. If not, it can be expensive.