A government financial agency is warning consumers to exercise caution when it comes to the “convenience checks” that often show up from credit card companies.
A recent consumer news item from the Federal Deposit Insurance Corporation notes that these checks should be treated like a cash advance, complete with potentially high interest rates and other headaches.
One important tip is for people to shred any convenience checks they do not use, since carelessly disposing of them could create an opportunity to identity thieves and other criminals to ring up some phony charges and damage one’s credit score in the process. It’s important to shred the documents as opposed to just throwing them out. This is because identity thieves will frequently get financial information from trash and dumpsters, despite the growing perception of their crimes as more technology-based.
“Dishonest friends, family members or workers around the house have found convenience checks very convenient for getting a loan without going through the hassle of asking,” said David M. Nelson, an FDIC fraud examiner.
Another sound strategy is to be aware of all fees and interest rates associated with using the checks. For example, the FDIC notes that if there is a 5 percent transaction fee on a $1,000 check, it will result in another $50 added on to one’s overall debt – as well as what is typically a higher interest rate.
Some people may be able to take advantage of lower interest rates when first taking on a new credit debt, but also need to know what the rate will be after the introductory one expires.
Finally, the FDIC warns that purchases with convenience checks may also be subject to fewer consumer protections. This is because credit card lenders typically offer a degree of protection on their customers’ purchases, while this is not usually the case for debit cards and other payment methods.
For people who are focused on debt consolidation and are trying to get ahead of their monthly bills, it may also be worth noting that the checks can just provide one more way for people to keep their balances high.
This is relevant because an important part of one’s credit score is keeping balances low in proportion to one’s account limit. Another way to boost a credit score is to try to keep the oldest accounts open the longest, as this helps maintain the longest possible credit history.