You open the mail to find three blank checks.
A gift from your credit card company? Barely.
With so-called convenience checks, you can pay off credit on other cards, make purchases for which you could not use your credit card, or issue the check in cash (not even to yourself).
But these checks are by no means free – even if it appears to solve your problems if your finances suddenly deteriorate.
"Basically, you're just writing a check to someone, but the money is being debited from your credit card," he said Alexandra Wilson, Certified Financial Planner.
This means that the amount for which you issue the checks will be credited to your credit card balance – along with the associated interest. Here's what you need to know about convenience checks – and some better alternatives.
What are convenience checks?
Convenience checks are actually just advertising materials used by credit card companies to offer you another option for spending. While they can be a convenient way to pay for someone who doesn't accept a credit card or access cash quickly, this convenience comes at a high cost.
If you are concerned that blank checks will be sent via email, you can deactivate pre-approved / pre-checked offers by registering with optoutprescreen.com.
Before you cash any of these checks, you should know what you will get when you sign on this line.
Since convenience checks are essentially cash withdrawals, you pay a higher interest rate than buying with your credit card at a cash register or online.
Similar to cash advances, interest accrues immediately when you issue a convenience check, as opposed to the grace period that you typically get with a credit card purchase.
A rare situation when using a convenience check could be the better alternative? If the convenience check rate is lower than your other option, e.g. B. as a payday loan.
Read the fine print even if you receive an offer by post for a limited time. 0% APR on the checks.
This APR may only apply to a transfer of the balance, and although you may receive the 0% interest rate, you may be charged an additional fee. And if you miss the promotional deadline, interest will be charged on the entire amount from the time you issue the check.
Credit line limits
Before using any of the checks, you should know that you won't get unlimited purchasing power – and usually will have to spend even less than if you had used your credit card to make the purchase.
"Your credit limit could be $ 2,000, but your prepayment limit could be $ 500," said Wilson. "So if you make a check for $ 1,500, it'll bounce off."
Alternatives to convenience checks
Depending on why you need the money, you should consider these alternatives to convenience checks:
1. Use your credit card.
If the company does not accept credit cards, check to see if you can purchase the item or service otherwise. In addition, most credit cards also offer purchase protection if there is a problem that you are unlikely to get with a convenience check.
2. Consider an electronic balance transfer.
If you are trying to transfer funds from another credit card, check an electronic transfer instead of using a convenience check. You may find a better APR promotion period. If you make the transfer electronically, your issuer may charge less than when you use the paper convenience checks.
If you don't find a transfer offer on your credit card issuer's website, contact the credit card company directly, Wilson said.
"Call the credit card issuer to see if they can offer you a wire transfer instead of just issuing the check," she said. "Even with balance transfers, you can actually transfer money to your checking account."
4. Use a mobile payment service
If you use your credit card, you will still be charged a convenience fee. However, mobile payment services like Venmo or PayPal charge around 3% for sending money to people using a credit card. If you can pay off your credit card payment by the next due date, you save a bundle of interest compared to a convenience check.
5. Buy gift cards.
In many cases, this option does not work. However, if you owe someone, ask if they accept gift cards as a form of payment. You can buy one for the amount you owe the person from one of the major card issuers – such as American Express, Visa, MasterCard – that they can use at most retailers.
If you choose not to use convenience checks that you receive by email, write "void" on each check and destroy them so that potential thieves cannot get their hands on them.
Activation of the card can involve an activation fee, but this is usually much cheaper than a convenience check.
And every dollar you can save now can be used to build your savings for that next cash emergency.
Tiffany Wendeln Connors is an associate and editor at The Penny Hoarder. Read their bio and other work here, catch them on Twitter @TiffanyWendeln.
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