High price to pay for convenience

Convenience checks are an easy way to obtain a loan, pay bills, or transfer balances to your account.

But you should exercise caution when using those checks, which most of us receive with our credit card statements each month.

They are “cash advances” that come with high costs and potential pitfalls.

When using a convenience check, it’s essential to make sure that the amount will not put you over your limit for cash advances.

If this happens, your credit card company may not honor the check, triggering overdraft and other fees.

If you use convenience checks, expect a transaction fee that can be a significant percent of the amount of each check.

If the fee is four percent, you will pay $4 to write a $100 check or $40 for a $1,000 check.

In addition to a transaction fee, the interest rate on the advance may be considerably higher-perhaps twice as much-than on a purchase made using your card.

Many people do not realize that consumer protection laws relating to credit card purchases do not exist for convenience checks.

Under the Fair Credit Billing Act, you may be able to withhold payment on defective goods.

But this does not apply to convenience checks, even though they are related to your credit card account.

What should you do if you receive convenience checks and prefer not to use them?

The answer is simple. Shred them immediately. Thieves routinely go through trash looking for valuable documents.

A permanent solution is to request your card company to stop sending you convenience checks.

This eliminates the risk of the checks being stolen and, more importantly, discourages their use as an easy solution to a financial problem.

Remember that convenience checks can be an expensive means to quick cash. Most people should use them sparingly — if at all.