Understanding balance transfer checks

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In a Nutshell

A balance transfer check is something that a credit card company may send to you in the mail. It often comes with a temporary promotional APR offer that could incentivize you to transfer debts to a new or existing credit card. But balance transfer check offers can be tricky, so it’s important to understand how to use them and when to pass on the offer.
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A balance transfer check lets you transfer loan and credit card balances from one account to another.

That way, you can pay off existing accounts and consolidate the debt into another one, sometimes at a temporary low or 0% interest rate on the transferred amount.

But don’t be too hasty to sign that balance transfer check. If you don’t read the fine print, you could end up paying more in fees and interest than you think.

How do balance transfer checks work?

Credit card companies sometimes send blank balance transfer checks to potential or existing customers. The check may come with a promotional offer for a temporary low or 0% annual percentage rate, or APR, which is the interest rate you’ll pay for your debt.

You can typically fill in the balance transfer check with an amount up to the card’s credit limit and then send it to another account to pay off its balance. Once you use the check, this amount is added to the account associated with the offer, transferring your balance to the credit card company that issued the check.

Don’t mistake a balance transfer check for free money, though. When you use the check, you’re responsible for paying back the amount.

What’s a convenience check?

Many balance transfer offers come as “convenience checks,” which don’t restrict the check to just balance transfers. You can also use convenience checks for cash or purchases. Convenience checks typically have higher fees and count as a cash advance with a higher APR.

What should I know about a balance transfer check?

Balance transfer checks generally come with a fee of “several percent” on the transferred balance, according to the FDIC.

Read the balance transfer check offer terms carefully to find the balance transfer fee you’ll pay. And make sure that the transfer fee doesn’t cancel out whatever you might save on interest.

If there’s a promotional low or 0% interest offer, look for the APR that will replace this temporary APR when the promo ends. Be aware that you could wind up paying more in interest than you planned if you don’t pay the full transferred balance off by the end of the intro period.

The balance transfer APR may be a different rate than the card’s standard purchase or cash advance APR, so read the terms closely. Remember, you can lose a promotional balance transfer APR if you pay late or go over your credit limit.

Read more: How to handle different APRs on the same credit card

When is a balance transfer check a good idea

“A good reason to consider using a balance transfer check is when it comes with a 0% introductory APR,” says Bruce McClary, vice president of communications at the National Federation for Credit Counseling.

But to avoid paying interest with a 0% offer, you need to pay off the balance by the date the promotion ends.

If you don’t think you can pay it in full before the higher APR takes effect, you might want to pass on a balance transfer check offer.

Proceed with caution

Balance transfer checks also come with a few pitfalls.

For one thing, if you cash the check but spend the money on something else, you’re just adding to your debt instead of reducing it. And if there’s no 0% offer, you could also start paying interest on the transferred balance as soon as the check posts to your account.

Then there’s the higher APR that kicks in once a promotional offer ends. You may intend to pay off the balance before then, but if you can’t, you could end up paying a lot of interest on the remaining balance.

One last thing: If you don’t use the balance transfer offer, make sure you shred the check so that no one else can cash it in your name.

Keep reading: How to protect yourself from ID theft

Bottom line

With a balance transfer check, you run the risk of going deeper into debt when you add in fees and interest, especially if you don’t use the funds to pay off other balances. You may be better off applying for an electronic balance transfer instead. That way, you won’t be tempted to add to existing debt and can still consolidate balances on a new balance transfer credit card at an introductory low or 0% APR.

About the author: Deb Hipp is a freelance writer with a bachelor’s degree in English and creative writing from the University of Missouri-Kansas City. When she’s not writing about personal finance and news, she enjoys traveling to seas… Read more.