What is a convenience check? How it works, what it costs and the risks

What it is

The FDIC describes it that way, and says you can use one to borrow against your card, pay a bill, or move another balance onto the card. When it is paid, it posts as a charge on your credit card statement.

It looks like a check, but the money is a loan from the card company, not money from your bank account.

What it costs

The FDIC says the checks are charged at the cash advance rate, which is often higher than the stated purchase rate. Expect a transaction fee, usually a percentage of the check. Its example: a 5% fee on a $1,000 check adds $50.

There is often no interest-free period. Interest often starts when the check clears, even if your regular purchases have a grace period. Introductory rates may also rise later.

Risks: if a check pushes you past your cash advance limit, the issuer may refuse it, and the returned check could trigger overdraft fees from your bank. The FDIC also notes dispute rights are harder to use for fraud involving these checks, and says thieves may search trash for unused ones, so shred what you will not use.

For a couple

If the card is shared, a convenience check is borrowing both of you owe. Read the offer's terms together before one of you cashes it.

A $1,000 check (made-up interest rate)

• Check amount: $1,000
• Fee of 5% (the FDIC's example): $1,000 x 0.05 = $50
• Added to your balance: $1,000 + $50 = $1,050
• Say the cash advance rate is 28% a year, charged from the day the check clears
• One month of interest: $1,050 x 0.28 / 12 = $24.50