What's the deal with these credit card checks?

Factual Questions
1

I lost my job three months ago, and thanks to a loophole in the state unemployment laws, I am ineligible to receive unemployment. Also, thanks to the fact that I foolishly worked my ass off to get ahead in a profession that generally doesn’t pay very well or have many long-timers, I am finding myself shut out of interviews because I am “overqualified” and/or “my last salary was way out of [prospective employer’s] range”. Most of the people in this profession who have the knowledge and years of experience I do have a degree, which I lack, so I am pretty much shut out from getting another position in the near future. For the last month I have been seeking a career change but am falling into the same trap new graduates do - no experience. I’m finding I can’t even sack groceries at Kroger because they’re leary of hiring someone who used to make $40,000 a year for a $6.00 part-time job. Which I think is funny becuase they will hire moonlighters, but that’s for another thread.

As a result, five months after closing on a new house, I am unable to pay my next mortgage payment, the grace period of which is expiring Thursday.

My son finds a way to come to my rescue - he’ll charge it on his credit card. Since there’s no way to make the payment by credit card, he decides he’s going to write a credit card check. I caution him to read the fine print slowly and carefully since those checks usually carry an exorbitant finance charge. He insists it’s only 7.99%, which although higher than his regular rate is still not outrageously outrageous.

I have my doubts so I read the fine print. Turns out, the checks that carry the 7.99 interest rate can ONLY be used to buy luxury items or for vacations - ie, to a travel agent, for airline tickets, hotel room, etc. He could still use his other checks or the cash advance option, but there’s a $400 limit on those type transactions and they carry the aforementioned exorbitant finance charge.

Why would they do this? Why would the credit card company CARE what items or services you are charging to your account? To make the situation even more curious, for every such check you write, your credit limit is automatically increased that same amount.

I admit I don’t understand credit cards and the precise ways they make their money, but I suspect using this tactic nets them more income. But how?

2

I don’t know for a fact but I’d guess that the credit card association has deals with merchants for travel and luxury goods that will steer more business their way with customers using these checks if the merchant gives the bank a fatter fee. Luxury items are generally higher profit items (don’t think that’s true of travel, though) so those merchants could more easily afford the fee.

Just speculation.

3

I just pulled some of my checks I’ve received. One of which I had used before to do a balance transfer. On that card (issued by USAA) and another (issued by MBNA), the only restrictions are that the account must be in good standing and that I can’t use a check to pay the same account (which is kind of amusing actually). They are subject to the credit limit, which is the same as the cash advance limit, for me. I guess it’s up to the issuer of the card that would limit its usage. Odd.

4

Maybe I didn’t clarify - he can use these checks however he wants, but to lift the limit and get the 7.99% rate he has to use them for the specified purpose.

And, interestingly enough, it is his USAA card.