Credit Card Cheques Need A 666 On Them – For More Reasons Than Often Said.

Capital One has just sent me some credit card cheques, delightfully telling me I’m lucky enough to have been specially selected. Well I don’t feel special, I feel insulted, and I feel an industry that perpetuates this type of action is acting irresponsibly.

Much has been written about the evils of credit card cheques, not just from Capital One, but most Credit Card providers. Yet often these complaints just skim the surface – there are many more hideous terms hiding beneath.

The Usual Reason To Spit

Most normal bile for CC cheques arises because they’re an obvious incitement to over borrow. They make it easier to use the money for anything or just to withdraw cash. They look and feel like normal cheques, and have that ‘oh it’s not real money’ spending pattern on them.

The Real Reason To Spit

Take a closer look at CC cheques and you realise where the real problems stem from:

  • There’s a fee. These cheques charge you for using them – usually 2% to 2.5% of the amount you spend on them. If you spent normally on the actual credit card instead then you wouldn’t pay this. So the ‘added convenience’ is really a ‘hidden cost’.
  • A three-fold interest rate hike. CC Cheques often include something like “these are treated like cash” on the card. This clever sell promotes a feeling that ‘it isn’t really a form of debt; it’s just like the folding stuff’. Actually this is a devilish phrase. Cash withdrawals on credit cards are much more expensive than other transactions.

    For example Capital One’s No Hassle Platinum card costs 6.9% for spending and balance transfers, yet 20% on cash withdrawals – so you pay nearly three times as much. In the letter I received (for a different Capital One Card) the cash interest rate wasn’t in the main print, so for those who don’t know cash withdrawals cost a lot more (probably the majority of people) they’re going to assume it’s the same.

  • You ALWAYS pay interest, even if you pay off in full. This is where it gets really devious. You see, when you withdraw cash on a credit card (or use these cheques, which count as cash withdrawals) you don’t usually get what’s technically called a ’54 day interest free period’, which you do get when you spend normally on the card.

    Now don’t confuse this with a 0% introductory offer. This is the term that means pay off in full at the end of the month and you won’t pay interest. So, withdraw cash or spend on a cheque and even if you were to repay in full at the end of the month, you’d pay interest and at that much higher rate.

  • That’s why CC Cheques are devilish. If you do receive a credit card chequebook shred it, burn it, eat, it, bury it, just don’t use it. (To any children reading, of course I don’t actually mean eat it, it’s just to make a point!)

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