The Inconvenient Truth About Credit Card Convenience Cheques

credit card convenience cheques often have misleading fees and interest charges.

Credit card convenience cheques, often sent out as promotional materials by credit card companies, are now a thing of the past for consumers who do not directly request them, according to new requirements for federally regulated financial institutions.

We have all received these cheques in the mail, especially when we’re issued a new card. The company will encourage card holders to use the cheques to transfer balances and pay bills under the guise that they are just like the cheques you use from your personal bank account. However, these cheques work in very different ways, carrying hefty interest charges. It’s important that users be aware of how they work signing their name at the bottom.

How Do Convenience Cheques Work?

When the cheque is cashed the money requested is added to your credit card balance and will appear on your next statement. You fill in the cheques like you always would, but unlike a regular chequing account you are guaranteeing that the credit, rather than the direct funds, are available. These cheques can be used by consumers to pay bills, purchase items and transfer a balance from a higher interest credit card to a credit card which may be offering a promotional low interest rate for a specific period of time.

Convenience Cheque Interest Rates and Fees

In most cases you will be charged interest from the day you use the convenience cheque, just like a cash advance. This is of course much different from a cheque you write from your personal chequing account, where the money is already available in your bank account. As well, there may be a transfer free to use the cheque. Customers should also be aware of when promotional interest rates are ending and what the rate will be after that period. The money used in convenience cheques is usually not eligible to collect loyalty points that your credit card might offer.

Protecting Yourself From Fraud

The Financial Consumer Agency of Canada (FCAC) says convenience cheques from a credit card company should be protected in the same way you would your cheque book, adding any convenience cheques not used should be destroyed before discarded.

New Regulations For Credit Card Companies

Federally regulated financial institutions (FRFIs) can no longer send these cheques to their customers in an unsolicited manner. These new requirement are part of the existing Credit Business Practices Regulations. They must now get  express consent from their credit card clients before providing them with credit card cheques. These regulations fulfill an Economic Action Plan 2011 commitment to assist consumers in managing credit indebtedness. Now if you want to use convenience cheques you will have to contact your credit card company to get them.

 

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2 thoughts on “The Inconvenient Truth About Credit Card Convenience Cheques

  1. Wow, I didn’t even know such cheques existed. Thanks so much for passing the info along. They sound like horrible, horrible traps and I’m glad the government stepped in for protection.

    • Agreed! If the government is looking to stem Canadian household debt levels, then limiting access to frivolously tapping into credit is a step in the right direction – and anything that sheds light on hidden fees is good news. :)

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