Using checks from your credit card company

Dear VPJ,

It isn’t necessarily unwise to use checks sent by your credit card company. It is critical to understand the implications of using them, though.

Using one of the checks is the equivalent of making a credit card charge. That means you have added to your debt and must repay the amount, just as you would if you used plastic for the purchase. Lacking a plan to repay the debt would be unwise.

You also should read the fine print before using one of the checks. In some instances, the checks are treated as a cash advance. That could mean you will have to pay additional fees or a higher interest rate. If so, you would probably be better off using the card rather than the check.

But, using a check can make good sense, too. For instance, you could use a check to make a purchase from a business that doesn’t accept credit cards. That could save you money if the item is less expensive than from other businesses that sell it.

Wise use of credit really isn’t about whether you use a plastic card or a paper check. It is really about asking yourself a few basic questions before making the purchase:

• Should you use credit or cash? It might be better to put off the purchase until you’ve saved enough to pay for the item directly, rather than take on additional debt.
• If you use credit, how are you going to pay back the debt, and by what date? If you don’t have a plan to repay the debt, you probably shouldn’t use credit to make the purchase.
• What are you willing to give up in the future if you use credit to buy the thing you want right now? Usually, buying something with credit requires a trade off. You may have to give up something in the future so that you can stick to the debt repayment plan that you are committing to when you make a purchase with credit.

Answer those three questions before using credit – and stick to your answers – and you will be using credit wisely.

Thanks for asking.