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Resolve Your Convenience Check Woes

I got hooked into using a 'convenience check' thinking it had a reasonable rate. Now I find out the rate and fees are sky-high. What are my options?

I got hooked into those "convenience checks" that Bank of America always sends me. The fine print on the back of the checks seemed to be legitimate and the APR rate appeared normal. So, I used one check for $20,000 to pay off some of my other bills. Now, here's the thing I assumed this was a "loan", I was wrong very wrong. I've been paying $470 a month now for 14 months and ONLY $70 a month is going toward the principle amount, the rest is going to all sorts of service charges! So in 14 months of payments on time I still owe $17,000. What are my options?

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Bill's Answer
(6 Votes) | Find Learn Save

Banks mail consumers checks like those you describe in your question, which are often called “convenience checks.” Unfortunately, consumers who accept the offers may find the payment terms are more difficult than they expected.

Banks issue two types:

  • Convenience checks tied to an existing credit card account
  • Convenience checks that create a totally new line of credit

Regardless of which type a consumer receives, when a consumer uses a convenience check, the issuing bank usually treats the money loaned as a cash advance on a credit card. Because cash advances generally carry much higher interest rates than regular purchases, the interest rates charged on many convenience checks can make repaying them difficult.

As I write this in 2009, the average interest rate charged on cash advances and convenience checks is 19.5%. By comparison, the average rate for regular credit card purchases is about 12%. Also, many banks charge an additional fee for the money loaned on a convenience check. For example, your bank may charge you a fee of 3% or more of the total amount borrowed, as it would for a cash advance. With a $20,000 check, this fee could add up to several hundred dollars (though many banks do have a limit of $200-$300 on the fee charged for convenience checks and cash advances).

As you can see, the repayment terms for these checks are not what a consumer would expect on a non-revolving unsecured loan, which is 6% and 10%, depending on the borrower’s credit rating. In addition, most unsecured loans do not carry the types of fees associated with loans made by convenience checks.

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Given the high interest and fees charged on this type of transaction, you can see why only $70 of your $470 payment is applied to the principal debt each month. Some convenience checks offer 0% interest for limited period, and can be a good way for consumers to cover expenses for a short time, but I generally advise consumers to avoid using such checks, even those with a 0% interest rate. If the consumer is unable to repay the debt during the 0% interest period, the high interest rates and fees typical of these checks is usually applied, making the debt very difficult to repay.

Repaying Your Convenience Check Debt

Hindsight is 20/20, and I think you realize you should have read the fine print more closely before cashing Bank of America's convenience check. Now that you negotiated the check and incurred the debt, your options are limited. Basically, you need to find a way to pay off this debt as soon as possible if you want to avoid the staggering fees and interest rate. I see five options for you:

Find a Different Bank Loan

Borrow the money from another lender at a lower interest rate to pay off the high-interest convenience check debt. You may be find a lender willing to lend you the money needed in the form of a standard, closed-ended, unsecured obligation, which usually have lower interest rates. That said, in 2009 our economy is in the grip of a credit crisis. Even if you have excellent credit, you may have trouble finding a lender willing to lend you $20,000 as an unsecured debt. Contact local banks and credit unions to discuss the possibility of borrowing the money you need.

Find a Peer-to-Peer Loan

Consider a peer-to-peer loan from Prosper or Lending Club. Both are lending networks funded by other consumers and investors. They help many consumers find loans they would be unable to obtain through traditional lenders.

Home Equity Loan

If you own a home or other real property, explore the option of a loan secured by your property. A secured debt puts your home at risk if you cannot make your payments. However, the interest rates are generally lower than on unsecured loans, so a secured loan may be a good solution if you are confident that you can make all payments in a timely manner.

Friends & Family

Consider borrowing from your family or friends.

Loan From Your 401(k) or Other Retirement Account

The interest rates on 401(k) loans are very low. The other advantage of a 401(k) loan is that you repay the interest to yourself.

As you can see, various loan options exist that may be able to help you. Take time to explore all possible solutions to try to find a loan that is the best fit for your financial circumstances. To read more about the various loan options available to consumers, you should visit the Loan Resources page.

Bankruptcy Option

Consider filing for bankruptcy protection. This is a last resort type of option, but you should be it is a possible solution to this and your other debts. If you are interested in learning more about bankruptcy and how it may improve your situation, consult with a local bankruptcy attorney and the bankruptcy page.

Fighting Fraud

If you believe Bank of America mislead you or hid important facts about the loan's terms and conditions, consult with an lawyer who has civil litigation or consumer law experience. If you can present a case in court that the lender intentionally misled you about the repayment terms, the court may rule the contract unenforceable. This would free you from the debt altogether. Proving such a case may be difficult, and you may not win, meaning that you could be spending a significant amount of money for legal representation only to end up still owing the debt.

An experienced lawyer will review your facts and offer an opinion on the strength of your case and the likelihood of prevailing in court. Contact your county or state bar association for a referral to an nearby consumer law or civil litigation lawyer.

I wish you the best of luck in resolving this obligation. I hope this information helps you Find. Learn & Save.



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  • 35x35
    Oct, 2010
    Convenience checks are not convenient for the average user and should not be used. However they are great to use them if you are an investor. Being able to come to the table with a cash offer on a house, I am able to purchase a foreclosure at an additional 15%-60% off what the bank would take from a normal conventional buyer. Its all about knowing how to use them properly. I can purchase the house CASH and then refinance, after repairs into a conventional loan and hold the property. or just sell, pay off the card and profit.
    0 Votes

    • GA
      Dec, 2013
      Franklin, TN
      Can you explain how you use those convenience checks to buy a house with cash? What cards do you use?
      0 Votes

  • BA
    Jan, 2009
    0 Votes

  • PL
    Jan, 2009
    with everyone going electronically now days, this seems like a resonable idea.
    0 Votes