You get home and check the mail and low and behold your credit card statement is in. Attached to it is a piece of paper that catches your eye. There is a convenience check attached. It could be for any amount like $300, $500, or maybe even $1000. The wheels in your head start spinning. There are so many things you could use the money for. You think about a fishing trip or some new gear or maybe even a present for your wife.
Woh, you should stop right there and put some thought into this check that you’re holding in your hand. Remember it is called a “convenience check”. In short for the most part all one of these checks work out to be are cash advances on your credit card. If you know anything about cash advances on credit cards then you know with them they usually carry many extra fees and unfortunately this is usually not understood by consumers.
I just want to show you a few types of fees that most credit card companies charge for cash advances on credit cards.
1. In addition to the normal interest charges you will be usually charged a 2-4 percent fee for the cash advance. So on a 1000$ convenience check you will pay an extra 20-40$
2. Something else that is quite common with cash advances are higher interest rates. Cash advances are usually charged at 18% or higher even if you have a low interest credit card. Something else is that most credit card companies only apply a small amount of your monthly payment towards the cash advance. Many companies require that you pay down the balance of purchases first before putting payments towards the higher interest advances. If you only pay your minimum you will be paying for a long time to get that advance paid off.
3. When you purchase items you usually have 30 days to pay off that purchase before you have to start paying interest on it. This is usually not true with cash advances. Quite often you will start paying interest immediately on any cash advances or when a convenience check is cashed.
4. Your credit card company has to disclose any terms that are involved with the convenience check so it is you the consumer who should be reading the fine print. If you can’t find any details on your statement anywhere then you should call your credit card company to find out any details.
There are two reasons that credit card companies charge these rates. One is to process the fees which are associated with the cash advance and secondly it is to cover all the loans that are defaulted on. So yes many times the faults of other people are passed on to the consumer.
In no way am I knocking the credit card companies. They are in the business to make money. It is up to you as an individual to make all your own decisions. The card companies are offering you this check but by all means you do not have to use it.
Dale Mazurek
