When Convenience Checks Aren't So Convenient
 
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When Convenience Checks Aren't So Convenient

San Diego, CA - Rarely has there been a consumer product marketed as a "convenience" become so inconvenient and even troublesome as the so-called "convenience checks". These official looking paper checks, imprinted with name and address, often arrive in the mailbox of credit cardholders without them even being requested. New cardholders get them within weeks of opening an account and most cardholders receive them around holiday shopping seasons.

Credit card issuers on the surface want you to think of them as good as gold, however, there are often conditions for acceptance as pointed out in the small print of cardholder agreements. Conditions like your credit report may be looked at to determine if a cardholder has gone on a spending spree or has defaulted on an agreement with another creditor before the issuer will accept and process the check.
 
According to a Dallas TV News report called "7 on your side", consumer reporter Michael Finney explained an unfortunate situation with a Mark Boileau who bought a Toyota Prius, with a convenience check issued by his credit card company, Bank One, to make a one thousand dollar down payment on the car. Mark told the reporter he's used credit card convenience checks many times. "I've used them for everything, including a down payment on a house during close of escrow," he said.

So Mark gave the Toyota dealer his check and drove off with his Prius. But three weeks later, Bank One called Mark and said it was going to decline his check. "I was devastated. To me this was bouncing a check to the car dealer. I had taken possession on it, I didn't know where else I was going to get the $1,000. I had miles on the car, my old car's gone," Mark lamented to reporter Finney on camera.
Mark said he was baffled - he was within his credit limit. He'd never made a late payment. So why was Bank One pulling the plug? Mark said "You have sufficient credit - more than enough to cover this check, however Bank One told him: "We're just not comfortable with your using this high of a percentage of your available limit."

Bank One had apparently pulled Mark's credit report and decided he was using too much credit. In fact, in Bank One's customer account agreement, it says it can decline a convenience check "for any reason." And Bank One's not alone - other banks say they may do the exact same thing. They can also lower your credit limit or decline credit card transactions, if they deem necessary and then tack on the appropriate over-limit fees too.

Beware, convenience checks are a favorite target of thieves too, who often steal them from unlocked mailboxes. Convenience checks are much easier to use than a credit card and they are added to a cardholders' account balance instead of being deducted from a checking account. Therefore they qualify for the highest interest rate applied to cash advances, according to many cardholder agreements, which makes their use very expensive. Even when a member of the household utilizes one, the cardholder agreement says the cardholder is responsible for the entire amount of the check, unlike the $50 limit of liability on a stolen or otherwise unauthorized use of a credit card.
Few, if any, security measures are in place for those who receive convenience checks in the mail, such as a newly issued credit card, which requires the user to call a toll-free number to activate the new card, in addition to a letter to the consumer alerting them that the cards have been mailed. ICFE has determined that American Express requires a telephone activation of convenience checks.
Stopping the flow of those checks to your mail box can be difficult too as Lynne Durrant with the University of Arizona Cooperative Extension in Tucson recently told the ICFE. She said "They are a nuisance to me because I always have to dispose/shred them carefully. However I am concerned that they are a great temptation for others to sink further in debt. I tried to opt out of receiving them last year from an account I had opened a few weeks earlier. I was informed they would do the paperwork, but it could take as long as 90 days to stop receiving them because it was already 'in the system'. However when months went by - at least 5 or 6 - and I was still receiving them I called and canceled the account itself. Voila! The checks stopped coming immediately."

BankRate.com warns their web site visitors about being careless with convenience checks this way. "If you use them, it will cost you. If you lose them, it could cost you even more. When it comes to convenience checks, there's plenty to be wary about. They come with hefty fees - as much as 5 percent of the check amount - and steep interest rates - often 20 percent or more."

If you receive unsolicited and unwanted convenience checks, ICFE advises they be put through a crosscut shredder immediately. Also contact the issuers and ask them to stop sending them. Should you decide to keep them for possible future use, put them in a very safe place and don't tell anyone you have them. Remember, just because they were sent to you and there may be an available credit line, there is no guarantee they will be accepted when eventually presented to the issuer.


 

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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