If you have a credit card, you've almost certainly gotten promotional checks in the mail that promise the chance to reward yourself by tapping your card for a pricey gift or a dream vacation.
Who reaps the biggest rewards when you use those checks? You guessed it: Your credit card company.
Cash-advance or convenience checks look just like regular checks. You can generally use them anywhere you could write a check.
But that's where the similarity ends. When you use a cash-advance check, your card company treats it as a cash advance -- a transaction that comes with a host of extra costs.
First of all, the card issuer typically adds a big upfront fee ranging from 2% to 4% on the amount of the check, with minimum fees per transaction that can boost the effective percentage even higher.
In addition, cash advances start accumulating interest charges as soon as they post to your account. You don't get the grace period that you get for regular purchases when you pay off your credit card balance every month.
Even worse, some banks charge higher interest rates on cash-advance checks than they do on purchases, adding to your financing costs.
Be Careful with Plastic Pacts
When cash-advance checks are tied to promotions, you need to be even more careful. Promotions may offer you a lower interest rate, but if you fail to meet their terms, you could void the promotion and end up with much higher rates.
For instance, using a cash-advance check after a promotion expires or failing to make payments according to the offer's terms could void your promotional rate and give you a big surprise on your bill.
Cash-advance checks can even be a hazard when don't use them. They're a favorite target of identity thieves, because they're easy to steal and use. Checks often come in junk-mail style offers, and so many cardholders unwittingly throw them away, leaving them for criminals to find. That's why it's important to shred any checks you receive rather than just pitching them.
Stop Problems Before They Happen
The easiest way to avoid the dangers of cash-advance checks is not to get them in the first place. By calling your card company, you can opt out of getting checks entirely. That's the safest way to avoid the big problems that cash-advance checks can cause.