The Inconvenient Truth About Convenience Checks

It’s time to pay the bills and you are down to your last penny, which makes the daily trip to the mailbox painful. On this occasion, though, you find something to get excited about–a window envelope containing something that looks like a check payable to you. After opening the envelope, it seems even more like a lucky break. The instructions tell you to fill in the amount you want, then take it to your bank and cash it. It almost seems like free money, and everything seems legitimate.

But, it’s not a check, it’s a high interest loan. These loans that appear like checks, are showing up in mailboxes more and more frequently. A wolf in sheep’s clothing if there ever was one, and beneath the disguise lurks some pretty ugly stuff. High interest is common among these loans, and is often set at an interest rate similar that for taking a cash advance on a credit card–anywhere from 18% to a whopping 36%. If that wasn’t bad enough, these products don’t come with the interest grace period that you may be enjoying on your credit card. In other words, the high interest rates start accumulating as soon as the ink is dry and the check is processed.

Check fraud is also a likely danger these situations, so it’s wise to approach an unexpected loan application or check with a high degree of suspicion. Scammers have been able to cash the checks. To prevent this problem, call your creditors and request that they cease sending you this type of check. Similar fraud scams have been associated with fake lottery checks, rebates, and other payout schemes.

These checks may seem like a convenient way to pay bills or make purchases when the budget is tight, but consider that doing so will only get you deeper into debt. Like any decision to borrow money, compared your options carefully. The best advice is to avoid these high-interest loans altogether. If you are struggling with your budget and need help making ends meet, seeking free credit and budget advice is a better investment than getting deeper in debt by borrowing out of desperation.

Clearpoint has been helping consumers with their personal finance goals and debt repayment strategies since 1964. Today, we work with consumers all over the country through counseling that is administered online, in person or over the phone. Learn about our services today!

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