(In)Convenience Checks

Look before you leap if your credit card company has offered to help you meet holiday expenses by mailing you some personal blank checks at a special low interest rate. They sound like a bargain, but you need to be careful.

These checks, sometimes inaccurately called “convenience checks,” are one of many potholes to avoid on the road to the holidays. The blurb accompanying a typical offering says: “Take advantage of this 3.99% fixed APR opportunity that lasts for the life of the loan!” It goes on: “Use these checks to transfer balances from higher-APR accounts, write yourself a check for some extra spending money or a weekend getaway, make a special purchase, pay for home improvement.”

The invitation says you can write the checks for any amount – up to the unused portion of your credit line. Then it adds: “See the enclosed insert for more details.” Good advice.

The fine print notes first that payments will be allocated to low-APR balances before higher-rate balances. That can mean that your monthly payments intended to apply to your credit card balance would go first toward paying off the loan incurred by the check. That could trigger a late-payment fee on the account and possibly a substantial hike of the interest rate, up to 20 or even 25 percent.

In this example, there would be no grace period on the required minimum payment of 2.1 percent of the amount of the check. Miss the deadline, and up goes the interest rate on the whole loan.

Don’t get the idea that you could use one of these low-interest checks to pay off part of your higher-rate credit card account. That would be grounds for the credit card company to refuse to process the check.

One more hazard: The special low rate can jump to 15 or 20 percent or higher if you miss the payment deadline on your credit card or are late in paying any other creditor.

Enough of this fine print. What if you lose one of these checks? A thief could make it out for any amount, cash it, go shopping or open a bank account. There is no provision for signature verification as there is for using a credit card.

So the thing to do if you get a set of these “convenience checks” is to use them only in a true emergency and after reading the small print. Even better, shred them or burn them before you get yourself into trouble or a thief causes you even worse trouble.