Blank Checks from YourCredit Card Issuer Carry Risks and Costs

Those blank "convenience checks" from yourcredit card company offer a quick way to write yourself a loan, pay bills ortransfer other loans to your credit card account. But be aware that the use ofa convenience check is a "cash advance" that comes with high costsand other potential pitfalls.

Take precautions to avoid serious fees and penaltiesif there's a glitch when you deposit a convenience check into your checkingaccount or send it to pay a bill.Before you write a check, make sure that it will not put you over your limitfor cash advances. Also find out what the current limit is in case your creditcompany reduced the amount you may borrow on your card through cash advancesand you forgot or did not notice.

"If the convenience check puts your card balanceover the new limit, your card issuer may not honor the check," said LukeW. Reynolds, Chief of the FDIC's Community Outreach Section. "The returnedcheck could trigger overdraft fees from your bank, returned-check fees fromothers and over-limit fees from your card issuer."

His recommendations: "Understand when your cardcompany might not honor a check. Consider calling your card company to verifyyour understanding of its policies," Reynolds said. "In addition, youmay want to call your credit card company again after you deposit the check into your bank and before you spend any of that money, tomake sure the card issuer has honored the check."

Know the fees and the interest rate you'll pay. Expect to incur a transaction fee of severalpercent of the amount of each check. If the fee is five percent, you'd pay $50to write a check for $1,000. In addition, the interest rate on this loan toyourself can be much higher than the rate on your card purchases, perhaps twiceas high. Most consumers believe that they will pay off the debt before theintroductory rate expires, but many find they can't.

Also consider that you may not be allowed aninterest-free period to pay the loan without interest accruing. "Mostlenders will begin charging interest when the check posts to your account, evenif they otherwise give you at least a couple of weeks to repay your credit cardpurchases interest-free," said Irma Matias, an FDIC Community AffairsSpecialist.

Even if you are offered a low interest rateinitially, find out what interest rate you will pay when the introductoryperiod is over. And, think twice about repeatedly transferring balances fromone credit card to another, because you could end up paying costly fees thatmore than offset the attractive, promotional interest rate.

Remember that there may be fewer consumer protectionswhen making purchases with convenience checks. When you use your credit card for purchases, theFair Credit Billing Act gives you the ability, under certain circumstances, towithhold payment on defective goods until the problem has been corrected. Thatprotection doesn't exist with convenience checks, even though they are relatedto your credit card account. Also, with convenience checks, you may not receiveany rebates or points as you would using a credit card.

Look for and shred convenience checks you don't planto use. "Dishonestfriends, family members or workers around the house have found conveniencechecks very convenient for getting a loan without going through the hassle ofasking," said David M. Nelson, a fraud examiner in the FDIC's FinancialCrimes Section. "Also remember that thieves rummage through trash lookingfor valuable papers such as convenience checks and bank statements, so do yourbest to shred these documents before you toss them away."

Consider asking your card issuer to stop mailing youconvenience checks if you're sure you don't want them. "This saves paper, avoids the risk the checksmight be stolen from your mailbox or home, and helps discourage you fromturning to the checks as an easy fix," said Reynolds. "Conveniencechecks can be expensive and many consumers find that they should be usedsparingly, if at all."

FIGHTING BACK AGAINST IDENTITY THEFT

COMMON WAYS ID THEFT HAPPENS:

 Skilledidentity thieves use a variety of methods to steal your personal information,including:

 1.       DumpsterDiving. They rummage through trash looking for bills or other paper with yourpersonal information on it.

 2.       Skimming.They steal credit/debit card numbers by using a special storage device whenprocessing your card.

 3.       Phishing.They pretend to be financial institutions or companies and send spam or pop-upmessages to get you to reveal   your personal information.

 4.       ChangingYour Address. They divert your billing statements to another location bycompleting a "change of address" form.

 5.      "Old-Fashioned" Stealing. They steal wallets and purses; mail,including bank and credit card statements; pre-approved credit   offers; and newchecks or tax information. They steal personnel records from their employers,or bribe employees who have   access.

DETER:

Identitytheft is a serious crime. It occurs when your personal information is stolenand used without your knowledge to commit fraud or other crimes. Identity theftcan cost you time and money. It can destroy your credit and ruin your goodname.

Deter identity thieves by safeguarding yourinformation.

Shred financial documents and paperwork withpersonal information before you discard them.

Protectyour Social Security number. Don't carry your Social Security card in yourwallet or write your Social Security number on a check. Give it out only ifabsolutely necessary or ask to use another identifier.

Don'tgive out personal information on the phone, through the mail, or over theInternet unless you know who you are dealing with.

Neverclick on links sent in unsolicited emails; instead, type in a web address youknow. Use firewalls, anti-spyware, and anti-virus software to protect your homecomputer; keep them up-to-date. Visit OnGuardOnline.gov for more information.

Don'tuse an obvious password like your birth date, your mother's maiden name, or thelast four digits of your Social Security number.

Keepyour personal information in a secure place at home, especially if you haveroommates, employ outside help, or are having work done in your house.

DETECT:

Detect suspicious activity by routinely monitoringyour financial accounts and billing statements.

Bealert to signs that require immediate attention:

*       Billsthat do not arrive as expected

*      Unexpected credit cards or account statements

*       Denialsof credit for no apparent reason

*       Calls orletters about purchases you did not make

Inspect:

*       Yourcredit report. Credit reports contain information about you, including whataccounts you have and your bill paying history.

*       The law requires the major nationwideconsumer reporting companies—Equifax, Experian, and TransUnion—to give you afree copy  of your credit report each year if you ask for it.

*       Visitwww.AnnualCreditReport.com or call 1-877-322-8228, a service created by thesethree companies, to order your free credit  reports each year. You also canwrite: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA30348-5281.

*       Yourfinancial statements. Review financial accounts and billing statementsregularly, looking for charges you did not make.

DEFEND:

Defend against ID theft as soon as you suspect it.

*       Place a"Fraud Alert" on your credit reports, and review the reportscarefully. The alert tells creditors to follow certain procedures before theyopen new accounts in your name or make changes to your existing accounts. Thethree nationwide consumer reporting   companies have toll-free numbers forplacing an initial 90-day fraud alert; a call to one company is sufficient:

*       Equifax:1-800-525-6285

*       Experian:1-888-EXPERIAN (397-3742)

*      TransUnion: 1-800-680-7289

Placinga fraud alert entitles you to free copies of your credit reports. Look forinquiries from companies you haven't

contacted,accounts you didn't open, and debts on your accounts that you can't explain.

*       Closeaccounts. Close any accounts that have been tampered with or establishedfraudulently.

*       Call thesecurity or fraud departments of each company where an account was opened orchanged without your okay. Follow up in  writing, with copies of supportingdocuments.

*       Use theID Theft Affidavit at ftc.gov/idtheft to support your written statement.

*       Ask forverification that the disputed account has been closed and the fraudulent debtsdischarged.

*       Keepcopies of documents and records of your conversations about the theft.

*       File apolice report. File a report with law enforcement officials to help you withcreditors who may want proof of the crime.

*       Reportthe theft to the Federal Trade Commission. Your report helps law enforcementofficials across the country in their  investigations.

*       Online:ftc.gov/idtheft

*       By phone:1-877-ID-THEFT (438-4338) or TTY, 1-866-653-4261

*       By mail:Identity Theft Clearinghouse, Federal Trade Commission, Washington, DC 20580