In personal finance, balance transfer checks have become popular for individuals who want to manage their credit card debt more effectively.
A balance transfer check is essentially a check issued by a credit card company that allows cardholders to transfer their outstanding debts from one credit card to another. There may be times when you have a balance on a credit card and want to transfer it to another credit card to receive a more favorable annual percentage rate.
Today we’ll discuss what a balance transfer check is and how to use it (and if you should).
How does a balance transfer check work?
Balance transfer checks are physical checks sent via U.S. mail to a credit card’s billing address. These checks are similar to balance transfer credit cards. Both allow you to move a balance from one credit account to another, as long as you don’t exceed the credit limit of the card receiving the new balance.
Just as credit cards charge 3%-5% for balance transfer fees, so does a balance transfer check. The main difference from a balance transfer check is that instead of completing the balance transfer online, you write a check to one credit card to pay off the balance on another card.
Consider the following scenario: You receive a balance transfer check in the mail for credit card A with a 0% APR offer for 12 months. You use that check to pay off a $2,000 balance on credit card B.
Within a few days, you’ll see that your balance on credit card B has been paid off, and credit card A has a balance of $2,000, plus any balance transfer fees the credit card company charged.
When should you use a balance transfer check?
Everyone’s financial situation is unique. Therefore, checking balance transfers may be of great use to some, while others may see them as a means of carrying ongoing debt. At TPG we emphasize the importance of paying credit card bills on time and in full to avoid late payments and interest charges.
Using a balance transfer check is useful in situations such as purchasing items on one card to receive purchase protection or bonus points thanks to bonus earning categories and then paying off the balance once it’s transferred.
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Balance transfer checks are also a great way to finance large purchases by taking advantage of low or 0% APRs for several months. This way you can be sure that you do not have to pay a lump sum from your checking account.
The best time to use a balance transfer check is when an issuer offers 0% interest for an extended period of time, as this will help you save money in the long run as you pay off the balance gradually over several months. Low annual interest rates, such as 0.99% or 1.99% on balance, may seem attractive compared to an average interest rate of more than 20%, but you will still accrue some interest.
Alternatives to Transfer Check Balancing
Using balance transfer checks is fairly simple. However, there may be easier alternatives if you find balance transfer checks useless or haven’t received one yet.
The easiest alternative to a balance transfer check is to perform a digital or online balance transfer. Suppose you have little time to transfer a balance and cannot rely on the US Postal Service. In that case, a faster and perhaps more reliable method is to request a balance transfer through your credit card company’s website or mobile application.
From personal experience, every promotional APR offer I have received as a balance transfer check is also available online as soon as I log into my account and view offers. Another alternative is to call your credit card company to see if you can use the balance transfer option over the phone with the help of a customer service representative.
Finally, you may not receive balance checks when you actually need them, or you may miss out on a promotion. A simple solution is to consider applying for a balance transfer credit card that offers a promotional APR.
In short
Balance transfer checks are an excellent way to manage debts or balances on one or more cards and transfer them to a credit card with a promotional APR. These checks will arrive in the mail, so keep an eye out for any letters from your credit card issuers.
Transferring a balance via check can save you hundreds in interest charges. However, as with any balance transfer, checks also incur a balance transfer fee. Calculate it and determine whether the offer is suitable for you.