How credit checks work

how credit checks work

Should I use credit card convenience checks?

The credit card checks arrive in the mail, several of them at a time, along with verbiage from your credit card company imploring you contemplate a money-saving balance transfer or to start planning that long awaited home improvement project. They are credit card convenience checks, and they are a quick, easy way to get a loan against your line of credit. But just like everything else in life, “quick” and “easy” aren’t likely to come cheap.

How Credit Card Convenience Checks Work

Credit card convenience checks provide you with the open-ended opportunity to write yourself a check based on the credit limit assigned by your credit card company. Whether you are putting in a new bathroom or taking a cruise through Alaska, you can fund the endeavor through the use of a credit card convenience check. But beware: interest starts accruing immediately, and at rates that are likely to exceed those on your regular credit card statement.

Protect Yourself from Credit Card Convenience Checks

You are your own best defense against the outrageous interest rates and fees that accompany credit card convenience checks. With fees commonly hovering around 3 to 5%, many credit card issuers also have a minimum. A minimum fee of $30 on a convenience check for $60 means that your financial output for this transaction, already made unmanageable by interest rates often in excess of 20% just went up by half.

If you don’t protect yourself from convenience checks, there is no guarantee that anyone else will. The protections afforded to consumers via the Fair Credit Billing Act on regular credit card bills and transactions do not necessarily translate to convenience checks. While credit card companies are required to look into all disputes related to goods or services of poor quality that are purchased with their card, this mandate does not extend to convenience checks.

These checks are also not covered under the FCBA clause that limits a cardholder’s liability to $50 in the event that the card is stolen and used for unauthorized purposes.

Credit Card Convenience Check Fraud

Convenience checks can be convenient for thieves as well. These checks, waiting only for a signature (which, in many cases, will not be verified in any way), can be sitting ducks

for theft in your mailbox, garbage can, or even at the post office itself. The checks often come with some of your personal information already filled out, which means that the situation resulting from one stolen check can quickly be exacerbated. A savvy criminal can combine the information on the convenience check with facts gleaned from sources in the public domain to go so far as to open new accounts in your name.

You may be able to ask your credit card company to stop mailing convenience checks. While policies vary from issuer to issuer, a phone call to the customer service number on the back of your statement will let you know how—if it is, in fact, possible—to request that convenience checks no longer be delivered to your mailbox. The cessation of these mailings is desirable because it offers criminals one less means of access to your credit card and personal information. In the meantime, be sure to shred each and every credit card convenience check that comes to your attention.

Before You Cash a Check from the Credit Card Company…

Since every credit card issuer has its own set of rules and rates governing convenience checks, it is important to read all the fine print. If you are currently searching out a credit card for which you anticipate the use of convenience checks, you’ll want to analyze the terms surrounding their convenience checks to find the one with the lowest fees (low minimums and maximums as well as a low percentage rate), lowest interest rate, and the most favorable conditions when it comes to payment.

For example, some issuers will first apply your monthly payment (when not paid in full) to the portion of your statement with the lower interest rate. Since your credit card interest rate is likely to be lower than your convenience check interest rate, this means the issuer will use your payment toward the credit card portion of your bill, leaving the balance on the convenience check to grow with impunity.

The terms surrounding credit card convenience checks are another important factor to consider when deciding which credit card to sign on with. It’s up to you to ensure that the checks are convenient for YOU, not for the credit card companies and not for criminals. Compare credit cards today!


Category: Credit

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