Four Reasons to Shred Those Credit Card Convenience Checks!

Effective Document Shredding Tool

It seems that every few weeks, I get a letter in the mail from one of my credit card companies with convenience checks inside.  Those checks are a tool that lets you put a cash advance on your credit line, which is bad news for most of us.  When I worked in banking, we would get checks like these every day written to max out a credit line deposited into a checking account!  I couldn’t believe people would even consider doing that.

There are many reasons to avoid using these checks.  Some that come to mind are below.

The cash you take out using a convenience check begins to charge you interest at your credit card rate, which can average over 20% APY for some people.  Why would you ever do that for extra cash?  Unless you can invest it with a guaranteed rate of return above that 20%, there is no reason to pay that kind of interest.

Some cards charge a cash advance fee if you decide to use the checks.  While not all cards charge a fee, it is often about 2% up front.  That is a 2% fee just for writing the check before interest even kicks in, which includes the fee in the compounding balance.

When you use them to withdraw from your credit line, you generally do not get the rewards associated with the account.  I get 2% on my credit card, I get 0% if it is from a convenience check.

These checks can be a possible source of identity theft.  Smart thieves know what these are, and know they can be used to tap into your credit card.  While you are likely not going to be responsible for the charges, it is a headache to get fixed.  Additionally, the thief gets you address and other personal information from the check which can be used for further identity theft in the future.

So why do the banks keep sending the checks?  Temptation and convenience.

How easy would it be to take that check over to the store and buy a brand new 60″ flat screen TV?  It would be as easy as doing it with you credit card, but the bank gets more money if you use the check, and that comes from your pocket.  Millions of people are dumb enough to use the checks, so the banks will keep on sending them.  However, before you get to the store, make a stop by the shredder to put the checks to rest.

Also, thanks to Mighty Bargain Hunter for including Narrow Bridge in this week’s Carnival of Personal Finance.