Convenience Checks: the Crack Cocaine of Credit?

Everyone likes to get checks in the mail. But there’s one type of check you really don’t want – so-called “convenience checks” from your credit card company. These unsolicited checks appear in mailboxes nationwide by the millions. They may appear tempting – just sign your name and the money’s yours – but for the debt-impaired, they’re nothing but unwanted and unnecessary temptation. They’re also a source of potential identity theft.

As we describe in the video above, convenience checks are normally just cash advances with obscenely high fees and/or interest rates.

“Convenience checks can be expensive and many consumers find that they should be used sparingly, if at all,” says Luke W. Reynolds, chief of the FDIC’s Community Outreach Section.

Here are some other reasons to shred convenience checks…

• “If the convenience check puts your card balance over the new limit, your card issuer may not honor the check,” Reynolds says. “The returned check could trigger overdraft fees from your bank, returned-check fees from others and over-limit fees from your card issuer.”
• “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,” says Irma Matias, an FDIC community affairs specialist.
• And then there’s the ever-present threat of identity theft, says David M. Nelson, a fraud examiner in the FDIC’s Financial Crimes Section: “Remember that thieves rummage through trash looking for valuable papers such as convenience checks and bank statements, so do your best to shred these documents before you toss them away.”
• Finally, you don’t have the same protections with convenience checks that you do with your credit card. When you use your credit card, the Fair Credit Billing Act lets withhold payment on defective goods until the problem has been solved. Not so with convenience checks, even though they’re related to your credit card account. And you don’t receive any rebates or points, either.

So when should you ever use these things? The only time would be in a true emergency, when the only other option is a payday loan – which we’ve also warned against here.

Can you ask your card company to take you off their convenience check list? Yes, and you should: simply call the phone number on the back of your credit card. But there’s no law requiring banks to stop… and even if they agree, expect the request to take several months. In the meantime, when you get these checks, be sure to shred them to prevent identity theft.