Most people hate ‘em, but that doesn’t stop credit card companies from stuffing our mailboxes with them every month.
Despite being hated, obviously plenty of people use them. Otherwise they wouldn’t keep sending them to us, right?
But before you write a convenience check to yourself or someone else, be aware of these three traps and two important tips.
#1. They carry higher rates (trap!)
With the exception of 0% APR convenience checks, you’re probably going to be paying a higher rate than you would on a regular purchase or balance transfer. Here’s an example from one of Citi’s credit cards to give you an idea of how most issuers price them:
This is why it’s best to avoid the checks and instead, find a way to pay the money thru a purchase or balance transfer. In #5 I will share with you some ways to do that which are often overlooked.
#2. They also charge a 3-5% cash advance fee (trap!)
Even if you get a check that promises 0% interest, make sure you read the fine print because more often than not, you will still have to pay an upfront 3 to 5% fee. Why? Because the credit card co’s usually classify the checks as cash advances and those almost always carry an upfront fee of 3 to 5%. Here’s an example from a local credit union in my area:
There are a few rare exceptions though. USAA convenience checks will waive the fee on most of their cards if you request the money be electronically deposited to your USAA bank account.
#3. There’s no grace period (trap!)
When you buy something with your credit card, the law requires there to be a minimum grace period of 21 days after the statement closes. If you pay your balance in full before then, you don’t get charged interest.
Although they’re not required to do so, many banks even give a longer grace period of 24 or 25 days.
That means you could buy something on day 1 of your 30 day billing cycle. When the cycle closes, you would have at least 21 days to pay it back. When combined, that’s up to 51 days of avoiding interest as long as you pay your balance in full. If you don’t, you will be charged interested going back to the first day of the purchase – that will show up on the following statement.
However with these checks there’s no grace period, so interest begins accruing immediately.
That means even if you’re only covering a short term hole in your finances, it’s still going to cost you. The interest over a couple weeks may not be much, but remember there will also be that 3-5% fee, too.
#4. Not every bank will give them to you automatically (tip!)
Being that they don’t even offer 0% balance transfers, it’s no surprise that American Express convenience checks are about as common as a dodo bird.
On some of their cards you can still get the money, but you need to call them up and they’ll electronically deposit the money in your checking account. But if you’re wondering when they’re send you these checks in the mail unsolicited, don’t hold your breath.
Those who are most known for sending these checks unsolicited are Bank of America, Citi, and US Bank. In fact when it comes to Citi, they still send them to me every month even though I’ve called and requested three times in the past year for them to please stop.
The takeaway? Not every bank will send you these unsolicited, but most will give them to you (or an electronic equivalent) if you call and ask.
#5. There may be a lower cost alternative (tip!)
Since balance transfers and purchases almost always have lower APRs, you will be better off going that route.
Even if you think you need cash, you might not! Thanks to PayPal, it’s quite easy to pay other people using your credit card. For example if you owe rent to your roommate, you can send it to them thru Paypal and charge the purchase to your card. If you do that with a new card that has an intro 0% on purchases, you will save money versus a convenience check or cash advance.