I Got a Convenience Check in the Mail. What Is it — & Should I Use One?

Those blank checks that come with your credit card bill aren't always as convenient as they appear.

If you have a credit card, you’ve probably at some point received a bill that comes with convenience checks. If you’re like most people, you glanced at those checks and sent them straight through the shredder.

But what are convenience checks, anyway? And should you use one?

What Is a Convenience Check?

On the surface, a convenience check — essentially a blank check your credit card company sends in the mail — looks like a great deal. You can use them to pay for purchases that you would otherwise be unable to charge to your credit card. For instance, you could pay your rent with your credit card by means of a convenience check. Or you can pay off one credit card with another via convenience check. However, there are generally fees and interest rates associated with these little pieces of paper that can make a seemingly sweet deal turn sour.

What Fees & Interest Do I Have to Look for?

Allow us to explain: Most credit cards come with a grace period every month from the time you get billed to the time the payment is due. This grace period can be almost two months long. How, you ask? Well, let’s suppose your credit card cycle ends on Day 10 of every month. If you swipe your card on Jan. 11, that cycle won’t end until Feb. 10 and you won’t have to pay for that purchase until March 10. That gives you nearly 60 days to accumulate the cash necessary to pay off the balance and avoid interest. (Here’s an explainer for anyone who wants more information on how this works.)

Convenience checks, on the other hand, generally don’t include this grace period. And they will often come with a 3% or $10 fee (whichever is greater). In other words, if you write a $1,000 check, you’ll likely have a minimum of $30 in fees.

Moreover, let’s suppose you cash a convenience check on Jan. 15. There’s a good chance the amount charged to the check will start to accumulate interest right away (usually at your card’s standard interest rate). So, if you want six weeks to pay off the sum, you could rack up a considerable amount of credit card interest.

Is There a Bad Time to Use Convenience Checks?

Generally speaking, you should avoid using these checks. They are incredibly tempting because of how they are designed — Look, a blank check! — but the fees associated with them often out weigh the convenience. Some rules of thumb to keep in mind when you get one of these checks in the mail:

  • If you can use your credit card to make the payment in question, a convenience check isn’t necessary.
  • If you can pay with cash or a check from your personal bank account, a convenience check isn’t necessary.
  • Unless it will save you money — for instance, you’re paying off a high-interest credit card balance — a convenience check isn’t necessary.

In most cases, you should avoid these checks, unless you’re doing a balance transfer (more on this in a minute) or it’s an absolute emergency.

Is There a Good Time to Use Convenience Checks?

Despite their shortcomings, these checks can prove to be beneficial from time to time, but only if you use them appropriately.

Suppose you have a card that carries a $5,000 balance. You believe that in the next 12 months you can wipe out that balance, but until it’s gone, you’ll still be paying 20% interest. If you have a credit card convenience check that offers 0% interest on the first 12 months, you’ll pay the 3% fee to use it — but you’ll also be saving on interest. You’ll have to crunch the numbers before cashing in, but if the terms line up, you could wind up reducing your bills and ultimately wipe out your debt.

Of course, you’ll want to consider all your get-out-of-debt options. Depending on your credit, you may be able to qualify for a premium balance transfer credit card that lets you skip the fee or gives you a longer period to pay a costly balance off. You also may be better off taking out a personal loan instead of messing around with 0% offers on revolving credit lines, like credit cards — especially if there’s a clause in the fine print that holds you responsible for retroactive interest on the full balance should you fail to pay it off before the offer ends.

In other words, be sure to read the fine print on a convenience check carefully. Otherwise, the credit card company might be the one that benefits, not you.

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The post I Got a Convenience Check in the Mail. What Is it — & Should I Use One? appeared first on Credit.com.

A Beginner’s Guide to Using Credit Cards

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Credit cards can be useful financial tools, especially when you need to borrow money or make large expensive purchases. They also can put you in debt if you don’t manage them properly. Here is a quick guide to understanding credit cards.

1. Why It’s Important to Own a Credit Card

Credit cards can help you pursue financial opportunities in your present and your future. They allow you to borrow money for large expenses; they can even help you in an emergency. Credit cards can also help build your credit history — that is, if you consistently make payments on time and keep your debt levels low. If you build a good credit history, you can find yourself less stressed and more financially literate. You’ll also have a better chance of receiving other loans, like a mortgage or auto loan, with reasonable terms and lower interest rates.

2. How Credit Cards Work

A credit card is an agreement between you and a bank or financial entity. First, you have to apply for the credit card. Then, if your credit history meets their standards, you will most likely be approved. Depending on the card’s issuer, you may have an annual fee for the card. Each month, you will receive a bill for your credit card along with a credit card statement asking for a minimum payment on your balance. If you choose to pay only that minimum amount, you may find yourself accumulating more debt due to the card’s interest rate. To avoid paying interest on your card, you might want to consider clearing your balance before the end of the month. (Remember, too, it’s wise to keep an eye on your credit as you work to beef up your score. You can view two of your free credit scores, updated every two weeks, on Credit.com.)

3. How to Properly Use a Credit Card

It is important to use your credit card carefully and responsibly. First, make sure you pay your credit card on time every month. This is crucial. If you miss a payment, you may get hit with a fee. And if you continue to miss your payments, know this will negatively impact your credit history, which could hurt you in the future when you try to secure a loan.

So pay off your charges in full every month, if you can. This will boost your credit score, ensure you always have a positive credit history and most importantly, keep you out of debt. If you do choose to carry a balance on your credit card after making your monthly payment, then I recommend using less than 30% of your available credit. (For best scoring purposes, you may want to aim to keep your credit utilization below 10% of your available credit.) This way you will never be too in over your head.

Remember, if you rack up charges on your credit card and can’t afford to pay them off, then you will likely continue to get hit with interest rate charges until you pay those balances down, leaving you more in debt than you’d planned. (Some cards offers 0% introductory or balance-transfer annual percentage rates that let you avoid interest for a period of time.)

Lastly, it is okay to own multiple credit cards, but it’s important to treat each card with the same care. Each month, try to pay more than the minimum or maintain a $0 balance. And if you are looking to open more credit cards, it’s a good idea not to do so all at once, as having too many inquiries in a short period could raise a red flag to lenders that hurts your score.

Image: Antonio_Diaz

The post A Beginner’s Guide to Using Credit Cards appeared first on Credit.com.

Snap a Pic, Pay a Bill: A New App That Can Keep You From Missing Payments

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Just when you thought your smartphone couldn’t be any more versatile, a new app has been introduced to streamline the entire bill payment process.

Plastiq allows consumers to pay bills on everything from rent and utilities to insurance, car payments, taxes and even tuition. The user can schedule payments instantly or implement the ‘Bill Stack’ feature to pay at a later time. You can even set up recurring payments via the app.

Whenever the bill is scheduled for payment, once you snap your photo, the app analyzes the information in the photo of the bill. Everything from the amount owed, the due date and the account information is processed and charged to whatever payment card you have on file.

This is especially appealing for people who use just one card to pay their bills. The user can input the card info and use the app to pay for all their monthly expenses. It also will notify users when a scheduled payment is due, helping users avoid late payments.

Plastiq charges customers a 2.5% convenience fee for every credit card transactions and 1% for every debit card transaction. Also, the company will only process consumer-to-business transactions. And as its name implies, Plastiq only processes payments from payment cards.

Why On-Time Payments Matter

Being punctual with your payments is fundamental to your credit health. In fact, your payment history holds the most weight (35%) among the five components that affect your credit score. Missing just one payment can drop your credit score significantly, especially if you have a spotless credit history. And a lower credit score can cost you tens of thousands of dollars over the course of a lifetime (seriously, you can crunch the numbers with this calculator).

If you want to see how your payment history is affecting your credit scores, you can get two free credit scores every month on Credit.com.

[Offer: If you want to fix your credit, and you don’t want to go it alone, you can hire companies – like our partner Lexington Law – to manage the credit repair process for you. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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Image: Pilin_Petunyia

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