What to Know About Convenience Checks from your Credit Card Company

Blank "convenience checks" from your credit card company offer a quick way to write a loan, pay bills or transfer other loans to your credit card account, but be aware that using a convenience check is a "cash advance" that comes with high costs.

Take precautions to avoid serious fees and penalties if there's a glitch when you deposit a convenience check into your checking account or send it to pay a bill. Before you write a convenience check, confirm the current cash advance limit in case your credit card company reduced the amount you may borrow.

"If the convenience check puts your card balance over the new limit, your card issuer may not honor the check," said Luke W. Reynolds, Chief of the FDIC's Community Outreach Section. "The returned check could trigger overdraft fees from your bank, returned-check fees from others and over-limit fees from your card issuer."

Know the fees and the interest rate you'll pay.

Expect to incur a transaction fee of several percent of the amount of each check. In addition, the interest rate can be much higher than the rate on your card purchases, perhaps twice as high. Most consumers believe that they will pay off the debt before the introductory rate expires, but many find they can't.

Also consider that you may not be allowed an interest-free period to pay the loan without interest accruing. "Most lenders will begin charging interest when the check posts to your account, even if they otherwise give you at least a couple of weeks to repay your credit card purchases interest-free," said Irma Matias, an FDIC Community Affairs Specialist.

Even if you are offered a low interest rate initially, find out what interest rate will be when the introductory period is over. And, think twice about repeatedly transferring balances from one credit card to another because you could pay costly fees that offset the promotional interest rate.

Remember that there may be fewer consumer protections when making purchases with convenience checks. When you use your credit card for purchases, the Fair Credit Billing Act gives you the ability, under certain circumstances, to withhold payment on defective goods until the problem has been corrected. That protection doesn't exist with convenience checks, even though they are related to your credit card account. Also, with convenience checks, you may not receive any rebates or points as you would using a credit card.

If you receive convenience checks and won’t use them, shred them to prevent potential identity theft. You can ask your card issuer to stop mailing convenience checks if you don't want them.