Paying Bills with a Credit Card: Cash Advance or Not?

Credit Card Checks and Cash Advances

Convenience checks are blank checks that enable you to write a check for payment that you may receive in the mail from your credit card company. This check payment shows up as a charge on your credit card statement. With the help of these credit card checks, you can quickly pay bills, write yourself a loan (also called a cash advance), or move other loan and credit card balances to your credit card account. Before you start using this convenience regularly, make sure you are aware of the costs involved. Generally speaking, these checks have different fees or interest rates than other credit card purchases.

Know the interest rate and the fees you will pay

You might think that the interest charged when spending on your credit card is all the same. Actually, your credit card company generally puts spending into two categories: purchases and cash advances. Convenience checks carry interest at the cash advance rate, which is frequently greater than the advertised purchase rate.

You should also anticipate paying a transaction fee when using credit card convenience checks, which is typically calculated as a percentage of each check. For instance, if the convenience check fee was 5% of the $1,000 that you wrote, you would have to pay $50 in addition to the interest that was assessed.

Convenience checks are actually loans for cash advances, so you might not be eligible for an interest-free period during which you can pay back the debt without interest. Many lenders, who would otherwise give you time to pay back your credit card purchases interest-free, start charging interest when the check posts to your account.

Find out what interest rate you will pay after the introductory period ends if you are given a low interest rate at the beginning of the cash advance. If you move money from credit card to credit card on a regular basis, you may incur expensive fees that will more than offset the promotional interest rate.

The majority of customers think they will be able to pay off the debt before the introductory rate ends, but many aren’t able to For more information about credit cards, visit FDIC Consumer News: Credit Cards.

Avoid fees and penalties when you deposit a convenience check into your bank account

In the event that your credit provider lowers the amount you can borrow on your card, be aware of the current cash advance cap on your credit card. Make sure writing a check won’t push you over your cash advance limit before you write it. Monitoring your balance and credit limit may also potentially make you aware of fraudulent activities.

Your card issuer might not honor the convenience check if it raises your balance above the limit. The returned check may result in overlimit fees from your card issuer, returned-check fees from vendors or merchants, and overdraft fees from your bank.

Remember that using your credit card excessively and over the limit could lower your credit score. For more information on credit scores, visit FDIC Consumer News: Credit and Credit Scores.

Understand when your card company might not honor a check. Consider calling your card company to verify your understanding of its policies. Additionally, to confirm that the credit card issuer has honored the check, you might want to give your credit card company another call after depositing the check into your bank and before using any of the money.

The Truth in Lending Act allows you to, in some cases, dispute billing errors when you use your credit card for purchases and keep the issue open until it is fixed. Though they are connected to your credit card account, the same protections are more challenging to provide in situations of fraud involving convenience checks. It should be noted that, unlike when you use a credit card under specified circumstances, you might not be eligible for any rebates or related awards when using convenience checks.

Look for and shred convenience checks you do not plan to use

The convenience checks you are sent should be kept secure if you choose to keep them so no one can use them without your permission. If you decide not to keep them, be sure to destroy them. Convenience checks and bank statements are among the valuable documents that thieves search through trash for, so make every effort to destroy these before discarding them.

If you are certain you do not want convenience checks, think about asking your card issuer to stop sending them to you.

By refusing unsolicited convenience checks, you can reduce the amount of paper used, reduce the chance that the checks will be stolen from your house or mailbox, and deter you from using them. Convenience checks can be expensive and many consumers find that they should be used sparingly, if at all. You may want to consider other options.

Please use caution and complete your homework before using a convenience check from your credit card issuer, even though it might seem like a great way to write yourself a loan, pay bills, or transfer other loans to your credit card account.

Consumer Financial Protection Bureau (CFPB): Can my credit card company charge me a fee for using a convenience check if the interest rate on the check is zero percent?

Federal Trade Commission (FTC): Using Credit Cards and Disputing Charges

How a Credit Card Cash Advance Works (and why you shouldn’t do one)

FAQ

Does paying bills with credit card count as cash advance?

Is sending money with a credit card considered a cash advance?

What is considered a cash advance on a credit card?

What is an example of a cash advance on a credit card?

Is paying a bill with a credit card a cash advance?

No, paying a bill with a credit card is not considered a cash advance. Some transactions/purchases that are commonly treated as cash advances include: Money transfers through payment apps such as PayPal or Venmo. Loan payments. Wire transfers.

Are credit card transactions considered cash advances?

Experian Certain “cash-like” credit card transactions are considered cash advances and trigger higher interest plus a cash advance fee. Examples include depositing convenience checks, purchasing money orders, using your credit card for overdraft protection and sending money through certain payment apps.

What is a cash advance & how does it work?

A cash advance is often the most expensive option. With a cash advance, you remove money from your credit card, similar to how you would at an ATM. It’s then your responsibility to deposit that money in your bank account to pay off your credit card. High fees and higher interest rates often accompany cash advances.

Can you get a cash advance with a credit card?

Using a credit card is one way to get a cash advance. In this case, you borrow a certain amount of money against your card’s line of credit. It typically involves fees and a higher APR than standard purchases. What is an example of a cash advance? Using a credit card to get a cash advance at a bank or ATM is pretty straightforward.