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You can call your card issuers and ask not to be sent convenience checks, but there's no law requiring them to comply. You may be told that it will take months for the convenience checks to stop because they're often made up far in advance. Or, Feddis said, the lenders may not be set up to stop convenience checks from going to individual customers.
So given all the hassles, why don't I just call these things evil? Because, like other suspect financial products, convenience checks can benefit at least some consumers, even if they're a bad idea for most.
When to use the checks
Here are some instances in which convenience checks might come in handy:- Example No. 1. If you're in a financial jam and have no emergency fund (shame on you), a convenience check is usually a better option than a payday lender or a loan shark. You'd be better off, though, if you had saved enough money to cover three months' worth of expenses and could use that instead.
- Example No. 2. If you carry a balance (another shame on you), the right convenience check can help you shift your debt to a lower-rate card, saving you money and (hopefully) speeding up the day when you pay your balance off in full.
You'll want to read the convenience-check offer carefully to understand what fees you're being charged, what interest rate you'll be charged on the transferred balance and for how long, what interest rate you'll pay on new purchases, how your payments will be applied and when -- exactly -- your payments are due.
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Fewer safeguards under federal law
Typically, you'll be charged a much higher rate on new purchases than on your transferred balance. If that's the case, you'll want to hold off on using the card again until you've paid it off. That's because your payments will typically be applied first to the lower-rate portion of your debt.
Also, set up automatic or recurring payments to make sure you don't miss a due date or, as is increasingly popular, a due time. Many issuers decide you're late if your payment arrives after, say, 1 p.m. on the due date. And even a single late payment can trigger higher rates.
By the way, you don't really need convenience checks to take advantage of balance transfer offers. You can call your credit card issuers and ask what low-rate balance transfer deals they have for you or check their Web sites. If your current issuers don't have any deals, check MSN Money's credit card analyzer for cards that do. Your balances can be transferred electronically -- no paper checks involved.
- Example No. 3. You like to play the arbitrage game.
Arbitrage is, basically, taking advantage of the difference between the interest rate you pay on money and the rate you can get if you invest it. Some posters on the Your Money message board have made a few bucks using convenience checks that offer 0% rates for a limited period of time. These folks use the checks to deposit money in a high-rate savings account or CD for as long as the teaser period lasts, then pay off the card balance before that teaser rate expires. See "0% daredevils chase 'free' cash."
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Checks a bit too convenientIf a thief steals your convenience checks, you could also be a victim of identity theft. It can wreck your credit rating, too. Here are some practical tips.
If you want to use a convenience check this way, make sure to read all the fine print -- twice -- to make sure you understand the deal and all its potential traps:
- Do the math. Make sure the extra interest you'll earn will more than offset any fees charged.
- Don't max out your card. The more of your credit card limit you use, the more you'll hurt your all-important credit scores. There's no way to tell in advance how much you'll ding your scores, which is why I typically recommend keeping balances below 30% of your limits if possible.
- Make the monthly minimum payments on time. One late payment could cause you to lose the low rate. One skipped payment could trash your credit scores.
- Don't use the card for other spending. Purchases typically accrue at a higher rate, and remember that your payments go to pay off the low-rate balance first.
- Pay off the balance in full before the teaser rate expires. Card issuers that offer low-rate teasers hope you'll forget or continue to carry a balance so they can make money off you.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Updated Dec. 21, 2007
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