Unbeknownst to many consumers, credit card companies sometimes send balance transfer checks with low introductory APR offers in the mail – but these checks could end up being very costly if used irresponsibly.
Consumers using debt consolidation checks should read through and carefully consider any fine print and calculations before using one, cautions Malik. Before making your decision to transfer debt onto another credit card balance transfer option, read all applicable fine print carefully as well as conduct the calculations necessary.
What are they?
If you’re struggling with credit card debt, balance transfer checks may appear helpful at first. While they might appear helpful, it’s essential that you read all the fine print prior to writing one – usually these offers contain fees that make them more costly than traditional cash advances.
Balance transfer checks may not always be true balance transfers at all; rather, they often look like no-interest offers that actually represent cash advances that start accruing interest immediately. Although their APRs tend to be lower than standard purchases, upfront fees may add up quickly.
Balance transfer checks allow you to move balances from an existing credit card issuer to one with the same issuer, typically with pre-filled payee information for your old card and an amount representing its transfer. Your maximum transfer limit typically falls somewhere within your credit limit’s upper threshold (though some cards only permit partial balance transfers).
Ramsey Preferred financial coach Larry Duffany notes that these checks are designed to attract new customers with low or 0% introductory APR rates, according to Ramsey Preferred financial coach. You don’t need to be currently using the card that issued it in order to receive one; some card companies even send these out prequalify applicants! You may be able to stop balance transfer checks from being cashed or deposited by calling your card issuer and asking for an extension, however doing so may incur interest charges in addition to increased balance transfer payments!
How do they work?
Balance transfer checks are paper checks sent by credit card companies to potential and existing customers that enable them to transfer an existing debt from another card onto their own, typically offering promotional low or no interest rate offers on transferred debts. Unfortunately, however, these offers often include transfer fees of 3%-5% of what’s being transferred, with minimum transfer amounts and other restrictions attached as well.
These checks function similarly to balance transfer credit cards in that they allow you to move an owed balance into another account without exceeding its limit, but they also serve as convenience checks, which allow the funds to be used however you wish (cash or purchases) and often come with higher interest rates than traditional balance transfer cards.
Balance transfer checks can be an effective tool for debt consolidation, helping you pay off credit card debt and high-interest debt that has piled up over time. Unfortunately, however, the upfront fees often outweigh any savings in interest savings; also due to high credit utilization levels they will cause an initial drop in your credit score until all transfers clear out.
Though you may feel tempted to spend with a balance transfer check, remember that you remain responsible for any expenses incurred from spending it; even if it wasn’t on the original card. If managing a new balance proves too challenging for you to handle responsibly, consider debt settlement or personal loans with more flexible terms and repayment schedules as alternatives.
How do I know I’m getting one?
Balance transfer checks work similarly to regular credit card payments, but with special incentives such as zero percent interest for 12-21 months. They’re usually sent directly by card issuers and made out directly to you. Some cards may offer convenience checks that allow cash advances – it is important that before using these types of checks that you understand their difference from balance transfer checks.
Balance transfer checks can be an excellent way to reduce debt and manage credit card balances, but they aren’t for everyone. The key is having an action plan in place so that the balance will be paid off before its 0% interest rate expires and so that higher rates won’t make your debt burden any greater.
Consideration must also be given to how cashing your balance transfer check and using it for purchases will add to rather than reduce credit card debt. Finally, if you can repay your transfer before the 0% interest rate ends and avoid getting new cards with higher fees by paying off the original one early, that can save time and effort when switching credit card providers.
Balance transfer checks should only be used as part of an overall debt management plan, in combination with other tools. If you decide to utilize them, be sure to carefully read and evaluate the terms and conditions and take full advantage of any 0% APR offers available to you. If balance transfer checks keep showing up in the mail, contact your card issuer immediately about opting out via phone call, online service, or email communication.
How do I use them?
Balance transfer checks are physical checks sent by credit card issuers that allow you to move balances from one credit card account to another in order to potentially save on interest charges. Keep in mind, however, that low or no interest rates typically only last a limited amount of time before increasing again and balance transfer fees could reduce any savings in interest charges.
Use balance transfer checks responsibly and they can be useful tools in helping consolidate debt or pay off existing balances more easily. Just be mindful that at some point the transfer period ends – make sure you have a plan in place so you don’t get left owing the balance! However, be wary – using them could have adverse repercussions for both your credit score and utilization ratio ratio if significant utilization ratio increases occur due to using one.
Balance transfer checks should not be confused with 0% APR cards designed specifically to handle balance transfers and come equipped with features like no initial APR or annual fees that offer several advantages over balance transfer checks. Some cards offer balance transfer checks as a part of promotional offers, while others only allow you to transfer balances from other cards. Convenience checks, similar to balance transfer checks but without an initial 0% APR period and with immediate interest accrual, often come with higher fees than balance transfer credit cards. While they might seem harmless at first, convenience checks could potentially increase debt significantly if they’re used recklessly; that is why it is essential that when receiving or comparing offers from different credit cards that you read all fine print carefully before signing anything or accepting the check offer.
How do I avoid getting them?
Balance transfer checks are an option available through some credit card issuers that allows you to move existing debt from one credit card to the next, similar to an ACH transfer but delivered as paper checks sent from them directly to you. They typically contain payee fields with information on both parties involved as well as any amounts being transferred over.
If you’re considering using a balance transfer check to manage your debt, be sure to read all of the fine print and do the calculations to ensure it makes financial sense. Sometimes a transfer fee may cancel out any potential interest savings; additionally, any 0% or low APR promotion should end before your ability to repay is fully fulfilled.
Be wary that these checks can sometimes be misused to pay off other debts such as personal loans. Consolidating debt in this manner is often seen as bad idea since it gives people false sense of security and causes them to spend more than necessary.
As a way out, when applying for a new credit card you should opt for online balance transfers instead of paper ones when initiating balance transfer checks. Or you could ask your card issuer to send an ACH transfer instead if needed. Please be wary, however, as some card issuers treat balance transfer checks like cash advances with high APRs and possible additional cash advance fees attached.
