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Read the fine print before using convenience checks

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Posted: Monday, November 19, 2012 12:00 am | Updated: 12:09 pm, Mon Jan 21, 2013.

FAIRBANKS – Along with all the regular credit card offers you get, you might have noticed recently you have received some that look like a check. How nice is that? A check that you can cash to finance Christmas.

These convenience checks often are sent by your credit card company. They look like free money, with 0 percent offers in bold print. These offers might seem like a tempting way to pay for holiday shopping, but you need to read the fine print to know exactly what you are getting.

The convenience check is linked to your credit card account. The promotional letter describes the check as an easy way to get cash, transfer balances or make a purchase that you have been putting off. It all can be yours if you just sign the check.

These convenience checks can be a costly way of borrowing money.

First, there is a fee for using these checks, usually 3 to 4 percent of the check amount.

They usually have a much higher interest rate than the APR on your credit card. Your credit card might have a 15 percent interest rate, but these come in at the higher rate that is charged for a cash advance, often more than 20 percent. 

There is no grace period with convenience checks. If you transfer a balance to the account or purchase an item with a convenience check, you will begin paying interest immediately.

Unlike many of your other credit card purchases, these checks normally do not earn rewards, nor do they give the same purchase protections as a credit card.

Before you use promotional checks, check your outstanding balance, including transactions that haven’t posted. Your checks, transactions and fees can’t exceed your credit limit. Check closely before using it, because going over the limit will pull down your credit score. If you go over your limit, your card issuer might not honor the check and you might end up paying returned-check fees to the merchant as well as over-limit fees to your credit card company.

Look for the expiration date. The check must be posted to your account by the designated date for the promotional APR to apply. If you use the check after the date, the issuer still might honor the check, but you will receive the interest rate for a purchase, not the lower promotional APR.

You might be tempted to use the check because it might be an introductory offer with a special low interest rate. Read and understand how long this promotional period will last before the interest rate goes up. After the introductory period is over, you might save money by transferring your balance to a credit card with a lower interest rate.

If you know you will never use the checks, open the letter and shred the checks to protect yourself from the possibility of fraud. You also can call your credit card company and tell them to stop sending convenience checks.

Roxie Rodgers Dinstel is a professor of extension on the Tanana District Extension Faculty. Questions or column requests can be emailed to her at rrdinstel@alaska.edu or by calling 474-2426. The Cooperative Extension Service is part of the University of Alaska Fairbanks, working in cooperation with the U.S. Department of Agriculture.

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