I'm a huge fan of doing this with practical effects as much as possible. It adds an organic, analog element to motion graphics that you really can't get any other way. You could fake this completely with AE, some clever Fractal Noise, blending modes, Roughen Edges, etc. But I like your idea better.
Oh, yeah, playing with matches!
There are many different ways to treat the paper so your lettering either burns first or remains white (or less charred) than the surrounding paper. You might explore professionaly pyrotechnic and magician suppliers for chemicals that are used in paper effects. You can also get chemicals that will add smoke or color the smoke or color the flames.
The opposite effect, leaving the letter, can be achieved with a simple fireproofing compound available in hardware stores. There are recipes available online for fireproofing paper.
Long ago, we'd get questions about simulating burning paper in AE, often referred to as the Bonanza Effect. A couple of us here always recommended the fun and unpredictably funky results of lighting up real paper. These days you can shoot at 120fps with your GoPro or iPhone. Dark room, backlight the smoke. The last time I did this was about 20 years ago. I used an A/B flash paper solution from a magic shop and a brush to do the calligraphy. The result was an accelerated ignition of the painted letterforms. We shot at 48fps on 16mm film. It was very cool.
Here's another vote for practical effects! I've used it as a visual reinforcement for the line, "the hottest ticket in town".
I suspended a piece of cardboard cut in the same aspect ratio as my ticket from its center in an all-black studio, soaked the edges in charcoal lighter fluid, lit it and shot it. It was a simple matter to use the Add blend mode to incorporate the flames, and animate darkening and eroding edges. It worked like a charm.
Thanks so much, guys! Bogiesan, I hadn't even thought of that, what a great idea! Dave, yeah, I did the burning effect before using that exact method and it does work quite well!