I never get anything free from my bank – especially cheques. Which is why I was pretty surprised when the bank sent me an envelope of free cheques a couple of months ago. The “convenience cheques” were tied to my credit card – I could just sign one and the balance would be posted right to my card. The bank even suggested how I could use the cheques (in case I didn’t have my own ideas). Here’s what they said I should do:
- Transfer balances from higher interest rate credit card
- Consolidate bills
- Pay for small renovations
A lower rate would apply (at first) and then the interest rate on the cheque balance would go up 21.50% (the rate for cash advances on my statement). Also, like a cash advance, interest is charged from the moment you cut a cheque without the grace period that applies to your regular card purchases.
Does this sound like a good idea to you? It’s not.
Using a credit card to pay bills or transfer balances from other credit cards is a bad idea, plain and simple. A lower interest line of credit or loan is by far the better way to go. Same goes for home renovations – using a credit card just isn’t the way to go.
The fact that banks send unsolicited cheques along with suggestions like this is troubling – which is why the federal government is planning to ban the practice. Under new legislation, financial institutions won’t be able to send you unsolicited cheques like this in the future. Consumers can only get them if they ask their bank.
As for me, I put my convenience cheques directly into the paper shredder.
What about you – have you ever used convenience cheques? Or do you toss them away?