NDSU Extension Service - Ramsey County

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Should I Use that Blank Check?

Should I Use that Blank Check?

            If you have a credit you have received – at least once a year – blank checks from your credit card company.  Called "convenience checks", the checks are an offer from your credit card company to write yourself a loan, pay bills or transfer other loans to your credit card account.  The convenience and pre-approval of that loan is very tempting. But be aware that the use of a convenience check is a "cash advance" that comes with high costs and other potential pitfalls.

            Before you write a check, make sure that it will not put you over your limit for cash advances. Also find out what the current limit is in case your credit company reduced the amount you may borrow on your card through cash advances and you forgot or did not notice. Consider calling your card company to verify your understanding of its policies.     

            Know the fees and the interest rate you'll pay. Expect to incur a transaction fee of several percent of the amount of each check. If the fee is five percent, you'd pay $50 to write a check for $1,000. In addition, the interest rate on this loan to yourself can be much higher than the rate on your usual card purchases, perhaps twice as high. Most consumers believe that they will pay off the debt before the introductory rate expires, but many find they can't.

            If you are offered a low interest rate initially, find out what interest rate you will pay when the introductory period is over. And, think twice about repeatedly transferring balances from one credit card to another, because you could end up paying costly fees that more than offset the attractive, promotional interest rate.

            When you use your credit card for purchases, the Fair Credit Billing Act gives you the ability, under certain circumstances, to withhold payment on defective goods until the problem has been corrected. That protection doesn't exist with convenience checks, even though they are related to your credit card account. Also, with convenience checks, you may not receive any rebates or points as you would using a credit card.

            If your decide to forego using the convenience checks, shred any you do not plan to use..  Anyone who rummages through your trash or picks the convenience checks up from your kitchen table can use the checks for getting a loan without going through the hassle of asking.

            Consider asking your card issuer to stop mailing you convenience checks if you're sure you don't want them. This saves paper, avoids the risk the checks might be stolen from your mailbox or home, and helps discourage you from turning to the checks as an easy fix to financial troubles.

 

 

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