If you’ve ever received blank checks in the mail from your credit card company, chances are they were credit card convenience checks. These checks allow you to access your line of credit — but often at a high cost. Before you write convenience checks, make sure you know how they work and how much you’ll pay to use them.
[Read: Best Credit Cards.]
What Is a Convenience Check?
Convenience checks, or credit card checks, enable you to access your available credit without swiping your card and can be used anywhere personal checks are accepted.
“They allow users to make new purchases, take a cash advance or pay off another credit card,” says John Schmoll, founder of personal finance website Frugal Rules. “You may also see them from a bank as a part of a home equity line of credit, but they’re more commonly offered by credit card issuers.”
How Do Credit Card Checks Work?
Convenience checks work like cash advances. You can use a convenience check to pay a bill or to get cash, and it will be reflected as a charge on your credit card statement.
“When you write a credit card check, the payment becomes a cash advance from your credit card account,” says credit expert John Ulzheimer, formerly of Equifax and FICO. “So you’ve essentially borrowed money against your credit card’s limit to cover the value of the check.”
Because convenience checks can be considered cash advances, they can come with fees and high interest rates. Also, your cash advance limit is typically less than your card’s credit limit. Make sure you know these limits before you use convenience checks.
Where to Get Credit Card Convenience Checks
You can get convenience checks in the mail from your issuer, either with your card statement or separately. Credit card convenience checks may also arrive unannounced as a promotional offer to entice you to apply for a credit card.
If you haven’t received convenience checks but want them, contact your credit card issuer and request them. You could pay a small fee for the checks.
How to Cash Credit Card Convenience Checks
Generally, you can cash a convenience check anywhere that you would cash a personal check, including at a bank branch or check-cashing location.
When you write a check to yourself, you can get cash in your bank account, though a portion of the amount may be held for several days before the balance is available.
[Read: Best 0% APR Credit Cards.]
Can You Write a Credit Card Check to Someone Else?
You can use a convenience check to pay someone else, such as a merchant, utility company or family member. A check is also an option for paying contractors that don’t accept credit cards.
“Convenience checks function very similar to a personal check you might write off,” Schmoll says. “You write the check to the individual or business, and it operates as legitimate funds.”
When you write a convenience check to pay a third-party debt, such as another credit card account, that is a balance transfer. You’re essentially moving the debt from one account to another, plus interest and fees.
How Much Do Convenience Checks Cost?
Convenience checks can be expensive to use. These checks are usually considered cash advances, which typically have a higher annual percentage rate than regular purchases you make by swiping your card.
You may also be charged a transaction fee that is typically a percentage amount of each check. The fee could be 3% to 5% or a $10 minimum.
“For example, if you write a convenience check for $500 and there’s a 3% fee, you’ll pay $15,” Schmoll says. “Additionally, if you don’t pay off the advance in a timely manner, you will likely incur interest fees.”
If convenience checks are treated as cash advances, they will not have a grace period and will accrue interest immediately at the cash advance APR.
Some credit card convenience checks come with a promotional offer, such as a 0% APR for a period of time. Read the fine print, including whether the rate applies to checks for purchases, balance transfers and cash deposits. Know when the 0% APR expires, and make sure you’re clear about fees and terms outlining how you might lose the rate, such as making a late payment.
Pros and Cons of Credit Card Checks
Pros:
— Provide a method of payment where credit cards aren’t accepted.
— Offer quick access to cash.
— Allow you to pay off high-interest debt when used for balance transfers.
— Require no credit check.
Cons:
— Usually include a transaction fee.
— Likely accrue interest immediately.
— Often charge a higher cash advance APR.
— Omit certain credit card protections for purchases.
— Typically won’t earn rewards.
— Have no restrictions to prevent you from going over your credit limit and incurring penalties.
Can Convenience Checks Affect Your Credit Score?
Credit card convenience checks do not directly affect your credit score.
“There’s nothing on a credit report that indicates you’ve written a credit card check to yourself, to cash or to someone else,” Ulzheimer says.
But racking up a large balance with convenience checks could drive up credit utilization, the percentage of available credit you’re using. When you write a check from your credit card account, the transaction is added to your balance and takes up more of your available credit.
Your credit utilization ratio accounts for 30% of your FICO credit score, and you could drag down your credit score until you pay down the balance.
[Read: Best Balance Transfer Credit Cards.]
Alternatives to Convenience Checks
Because of the high cost of convenience checks, you may also want to look at these options:
— 0% introductory APR offer: Look for a credit card with a 0% APR offer on balance transfers. Plan to pay off the balance during the promotional interest period.
— Personal loans: You can find lower interest rates and better terms than with convenience checks.
— Home equity loans or lines of credit: Do the math on fees to be sure this option makes sense. Also, consider that you use your home as collateral, which can put it at risk if you can’t make your payments.
— Use a payment service: If you need to pay a merchant that doesn’t accept credit cards, a service such as Plastiq may offer savings over a convenience check. You’ll pay a transaction fee, but your overall fees and interest charges will likely be lower with this option than with a convenience check.
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What Are Credit Card Convenience Checks? originally appeared on usnews.com
Update 03/07/23:
