They’ve been called the crack cocaine of the credit card industry, the convenience
check. These checks are often included as statement stuffers to your credit card bills
but they do come as stand alone mailers as well. These checks are designed to entice
credit card customers to either take cash advances or pay off other credit card debt and
“transfer” it to the issuer sending the checks.
As with most financial services products, the big print giveth and the fine print taketh
away. Convenience checks don’t normally have the same terms as normal “swipe”
charges made with your card. The interest rates are often significantly higher than rates
paid on revolved card purchases. And, there is almost always a balance transfer fee if
you use the convenience checks to pay off another credit card. You can shell out as high
as 4% of the balance transferred.
Now, don’t get me wrong. Using convenience checks to transfer credit card balances
isn’t necessarily a bad idea. For example, if you’re able to move debt from a 24.9% rate
to a 14.9% rate then you’ve likely won a temporary battle just as long as the balance
transfer fee didn’t eat up any benefit of the lower interest rate.
The issue with convenience checks is the aura of capacity they seem to suggest. At the
end of the day, you only have as much as your credit limit says you have. And, in some
cases the use of a convenience check can’t max out your credit card because the issuer
doesn’t give you the same “cash advance” limit as your true credit card spending limit.
And finally, there are the potential credit score issues that exist with the use of
convenience checks. While the usage is not reported to the credit bureaus, they can
cause significant increases in credit card balances, which are reported to the credit
bureaus. And, there is no discounting of convenience check debt when it comes to your
credit scores. If their use results in a highly leverage credit card, their FICO scores just
went down.
“The Credit Guru”, Longtime FICO Insider & Credit Industry Authority President Of The Ulzheimer Group, LLC
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group, the Director of Credit Education at DisputeSuite.com, Credit Expert at CreditSesame.com and the credit blogger for Mint.com. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 150 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
