Credit card companies issue convenience checks as a way for customers to access their credit lines. Like most things in the financial world, there can be two sides to the "convenience" of a credit card check. For responsible users, a convenience check can simplify life and add flexibility to a credit card account. For others, the temptation for abuse can be too great, and the convenience offered by the checks can instead cause financial problems.
Credit cards can be convenient, but they don't always offer ready access to cash. A convenience check solves the problem by directly linking to the credit line on your card account. You can use these checks just like any other type of bank check. Convenience checks are commonly used to transfer balances between card accounts -- simply write the check to the card company you want to pay off, and the balance will reappear on the card linked to the check. You can also use convenience checks as a type of loan. If you write the check to yourself, your credit card company will transfer funds to your bank account.
Any type of convenience in life typically comes with a cost. Credit card convenience checks are no different. Typically, a card company will charge you a fee of between 3 percent and 5 percent of the amount you access with your check. In some cases, the total amount may be limited to $100 or so, but many companies nowadays place no maximum on the fee. If you use a check to transfer a $10,000 balance, for example, your fee might reach $500 or more. Additionally, card companies will charge you interest from the moment you use your check. In some cases, you'll be offered a low short-term interest rate to motivate you to use the checks. However, when that rate expires, you might be assessed the cash-advance interest rate, which often exceeds the ordinary purchase interest rate.
The main risk with a credit card convenience check is that it provides easy access to cash. Although you can sometimes get a cash advance on a credit card from an ATM, your bank usually limits the amount you can withdraw to a few hundred dollars. A convenience check, on the other hand, usually lets you access your entire credit line. With the simple stroke of a pen, you can deposit the entire limit of your credit card as cash in your bank account. If you spend all of that money, you'll have to come up with other cash to pay off your credit card. Interest and fees can pile up rapidly, and you may find yourself in over your head.
In most cases, you can't use a credit card convenience check to pay off a credit balance at the issuing bank. For example, if you have two different Chase credit cards, you can't use a check from one to pay off the other. While you can often access your entire credit line, some banks will limit you to your cash advance credit line, rather than your purchase credit line. If you've already maxed out your credit line, you can't use your convenience check to access additional credit unless you call the issuer and ask for an increased credit line.
John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.