Credit Card Convenience Checks: The Basics

We’ve talked about how to manage credit card balances, but what happens when you receive a new offer? This topic came to my attention while opening my own credit statement. Attached to my bill were three blank checks.

“Saving money on interest is easy with these checks,” the statement read. “Checks make it easy to use your account the way you want!”

I’ll admit, I was puzzled by the offer and the attached statements. Use my credit the way I want? I already have that option, don’t I? What’s the point of this?

Read on to learn the answers. They will help you decipher your own credit offers.

What is a credit card check?

Also dubbed a “convenience check,” this option is another way to make charges to your credit card. Each check is linked to your credit account and may be used to make purchases as long as they do not exceed your credit limit.

How do they work?

A convenience check is confusing at first glance. “Why wouldn’t I just use my credit card?” you may ask. Convenience checks are different for a few reasons, including:

  • Promotional interest rates. The offer I received guarantees 18 months of zero interest when I use the checks (regular card purchases are still subject to 15.9 percent APR).
  • Cash advances. Looking for some extra cash? Convenience checks allow you to withdraw money from your account. Yes, you can write yourself a check and cash it.
  • Balance transfers. If you have other debts with accruing interest, use a convenience check with zero interest to pay off the balance and eliminate the burden.

Is there a catch?

In a word, yes. While the items listed above may seem like a deal, there are always strings attached. In my case, using convenience checks would result in:

  • Transaction fees. My offer imposes a 4 percent transaction fee for every check I use. For example, if I bought a new Jacuzzi for $6,000, I’d pay $240 for writing the check.
  • Time restraints. “Use your checks before September 14,” my offer said. The average creditor offers convenience checks for a limited time, creating a use-it-or-lose-it restriction.
  • Limited terms. Sure, my convenience checks offer 18 months of zero interest, but then what? Suppose I couldn’t pay off my $6,240 balance during the promotional timeframe. Once it expires, my account will accrue 15.9 percent APR, making it more difficult to repay the principal balance.
  • Credit damage. Utilization is a factor when using any type of credit. Overcharging with convenience checks will negatively impact my overall credit health and affect up to 30 percent of my credit score.

Should I use convenience checks?

The choice is yours, but like any line of credit, we recommend following a budget and avoiding unnecessary risk.  Consider the following examples:

  • John received three convenience checks in the mail. His account information is as follows:
    • Current balance: $2,500, billed at 15.9 percent APR
    • Credit limit: $7,500
    • Current utilization ratio: 33 percent

John’s utilization ratio is already higher than the recommended 25 percent. Ignoring the risk, John decides to spend $3,500 on a trip to Rome.

  • Mark received the same convenience check offer. His account information is as follows:
    • Current balance: $500, billed at 15.9 percent APR
    • Credit limit: $7,500
    • Current utilization ratio: 6.6 percent

Mark also has $4,500 in private student loans, a balance he plans to pay off before the end of the year. Seeing an opportunity to avoid accruing interest, Mark uses a convenience check to eliminate his education debt and its 7.9 percent interest rate. He pays off the new credit card balance before the promotional period expires.

As we learned from John and Mark, convenience checks have the power to hinder or help financial health. Take a lesson from Mark and choose wisely.