Credit Cards

How To Use Balance Transfer Checks

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

With a 0% introductory APR, balance transfer checks can save you money, but be careful to read the fine print.

To entice potential new clients to open an account, several banks offer initial 0% APR rates. For those who still have an amount to pay off after the promotional interest rate period ends, you may not want to apply for a new credit card because of this.

Fortunately, several credit card issuers give the option to acquire continuing 0 percent APR deals in the form of balance transfer checks. A balance transfer cheque in the mail or an opportunity to save money on interest on your credit card? This is the guide for you.

Exactly what do you mean by a balance check?

Rather than a bank account, a balance transfer check is a paper check linked to your credit card. To facilitate the transfer of a balance from another credit card to the one that is issuing the check, they have been designed. These cards are given out by banks as a way of enticing customers to keep using their credit cards.

Using a balance transfer check can result in a balance transfer charge ranging from 1% to 5% of the transferred amount, but the introductory 0% APR is well worth it. If you write a check for $1,000 and the balance transfer fee is 3%, you will be charged $30 in addition to the $1,000 check amount when you use your card to make the transfer.

As a result of its architecture, however, balance transfer checks may be used for a wide range of purposes, not just for balance transfers. Consolidating your debt into one payment might be as simple as writing a check to a different lender. Instead of writing a personal check, you can deposit the funds in your checking account and utilize them to cover your regular monthly expenditures.

After two years working for the same firm, in 2017 I even utilized my balance transfer check to execute my stock options. I was short on cash at the moment, but I was certain that the transaction cost of 1% would be dwarfed by the potential profit I would make when I eventually sold my 1,000 shares.

Balance transfer checks vs. convenience checks

In addition to balance transfer checks, your credit card provider may send you other checks. At the end of the month, convenience checks are typically linked to your statement, allowing you to accomplish the same thing as balance transfer checks.

Convenience checks, on the other hand, are cash advances. So in addition to a cash advance charge, you’ll also be charged a balance transfer cost, which is normally more than a balance transfer fee. It is true that cash advances accrue interest instantly with no grace period, and in some cases, the APR on your credit card may be greater for cash advances than it is for purchases (annual percentage rate).

That’s why reading the conditions of each blank check you receive from your credit card company is so critical! There is a lot of information hidden in the small print of the checks, even if they appear to be the same on the surface. An example of a convenience check is one that has a higher APR than your card’s standard APR or has language concerning interest beginning from the time the check is deposited if there is no 0% APR incentive specified.

The fine print of the balance transfer offer should always be reviewed even if you are certain you have a balance transfer check in your hands. A surprise, while you’re trying to save money, is the last thing you need.

How to use a balance transfer check

In certain cases, the card issuer will send one to you, while in others, you may be able to request one from them. Find out if you can request a balance transfer check by checking your online account or calling customer service. It’s vital to treat balance transfer checks like personal checks after you receive them since they appear and function like them.

In order to pay off another credit card, compose a check payable to the credit card issuer and mail it in. By writing the check out to the lender that holds your personal loan, you may make a payment. Alternatively, you may write the check to yourself, deposit it into your bank account, then make a payment to your credit card account or personal loan online.

You’ll get a few balance transfer cheques in the mail when you open your mail. Checks that you don’t intend to utilize should be shredded instead of thrown away. The only person who may access your credit line is you.

You’ll see the funds, along with the balance transfer charge, posted to your credit card account once the beneficiary has deposited the check. You’ll be able to pay off the transferred balance for as long as the offer specifies without incurring any interest costs.

When is a balance transfer check a good idea?

Even though balance transfer checks might benefit you in some cases, it’s crucial to maintain sound financial practices.

When I decided to transfer my balance, I used a balance transfer check since the prospective benefit of exercising my stock options surpassed the $12 balance transfer cost. Options that I purchased for $2,000 were recently offered to me for $7,000 by the corporation, despite the fact that I paid $1,000 for them. When the introductory time was over, I knew that I would be able to pay down the rest of the sum within months.

If you have an unexpected cost, you may want to consider using a balance transfer check rather than placing the charges on your card at the usual purchase APR. Even if you have to pay a charge for the check, you may wind up spending significantly less in interest than you would have otherwise. Rather than combining high-interest credit card debt, you’re avoiding it altogether.

Finally, utilizing a balance transfer check to pay off another credit card is undoubtedly worthwhile.

A balance transfer check’s charge must be weighed against the possible savings you may realize by using its 0% interest offer, regardless of the way you decide to utilize it. There are other credit cards out there that may have cheaper balance transfer fees or longer interest-free periods, so it’s worth doing some comparison shopping to see if you can find an even better deal. A new credit card may not be pleasant, but it may be worth it if you can save a lot of money in the long run.

Bottom line

In order to consolidate your credit card debt or cover any other critical costs, balance transfer checks are a terrific option. Nonetheless, before you use one, make sure you read the tiny print and do the arithmetic to see if it’s the best financial move for you.

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