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How do balance transfer checks work?

Information verified correct on February 24th, 2017

What you can do with a blank check from your bank

What are balance transfer checks?

Even a small amount of debt can grow into a monstrous task when interest rates are high. One option is the balance transfer check. These are blank checks usually sent to your mailbox by a credit card company that wants to make you an offer on a new balance transfer credit card.

By using these checks, you agree to open and transfer your balance to the company’s card. Balance transfer checks usually include the terms of use and are available to use for a certain period of time. During the promotional period these checks usually carry a 0% or slightly higher APR, depending on your creditworthiness.

How can you use a balance transfer check?

A balance transfer check can be written directly to another lender you have a balance with or made out to yourself and cashed. In either case the amount written is then applied to your balance with the credit card company the check is from. You can write the checks only for amounts up to the credit limit allowed by the lender.

Pro tip:
If you’re unsure whether a check is going to act as a cash advance, call the bank that sent it to you. Better to find out before you cash it!

Is using a balance transfer check a good deal?

Here are examples of features to look for:

  • Length of introductory period. Introductory windows vary based on lender and creditworthiness. It’s important to shop around for one that will best serve your needs. Perhaps a shorter window is all you need to pay off a smaller balance, but that period may not be as beneficial if you have a larger balance you need to pay off in smaller amounts.
  • Intro APR. This APR differs from lender to lender. Some checks offer as low as 0%, but they can go up to 3-4% based on creditworthiness.
  • Full APR. After the introductory period is over, the provider will apply a higher APR to any remaining balance. If you know you will still have a large balance remaining it may be beneficial to seek a different check or a balance transfer card with a lower full APR.

Comparison of Balance Transfer Credit Cards

Rates last updated February 24th, 2017
Intro APR for Balance Transfer APR for Purchases ( Purchase Rate ) Annual fee
Barclaycard Arrival Plus World Elite MasterCard
Earn 50,000 bonus miles and enjoy the current 0% p.a. for 12 months
0% Intro APR for 12 months (with minimum of $5 or 3% balance transfer fee) 16.49%, 20.49% or 23.49% Variable $0 p.a. annual fee for the first year ($89 p.a. thereafter) Go to site More info
USAA Military Affiliate Card
Earn 2,500 bonus points credited to your account with your first purchase and then 1 point per $ spent. No expiration date.
0% Intro APR for 12 (with After 12 months, your APR will be 11.15% to 26.15% based on your% balance transfer fee) 11.40% to 26.40% $0 p.a. Go to site More info
Barclaycard Ring™ Mastercard®
Low interest rate on purchases, balance transfer and cash advances.
0% Intro APR for 15 months 13.49% Variable $0 p.a. Go to site More info

Have we missed anything in the comparison table? Tell us

  • If the provider quotes a different rate to the one above please let us know

Why am I getting this offer?

You may notice that balance transfer credit card offers always come from a different bank than your current card provider. Balance transfer checks are a benefit that providers use to earn your business from competitors.

What to look out for

An intro APR is only effective if you make full use of it and know any caveats that may apply.

  • Once your intro APR window closes, you revert to the lender’s full APR for your creditworthiness and card type. Any balance that you have not yet paid off begins earning interest just as it would with any other credit card.
  • Balance transfer checks that act as a cash advance carry a higher interest rate. 
  • Transaction fees and finance charges may apply. When dealing with balance transfer checks, if you don’t pay off the full amount spent after the intro period, you may wind up paying finance charges every month on the unpaid balance. Transaction fees up to 5% of the borrowed amount may also apply, depending on the lender.

Leveraging credit with balance transfer checks

You can also use balance transfer checks to borrow money from your credit card and invest those funds in something that returns higher interest than you need to pay to maintain your loan — such as a CD or high-yield savings account. You would then make minimum monthly payments until the promotional APR expires, at which point you’d withdraw the money, pay the balance in full and profit from the remaining difference.

This is called balance transfer arbitrage. While legal, this scheme does involve risks. Also, the debt you will carry could possibly exceed the recommended credit card utilization ratio, which could negatively affect your credit score.

The final word

Looking into the different types of balance transfer cards and comparing them against balance transfer checks can make a big decision that much easier. A balance transfer check allows you to convert some of your credit into cash to pay another lender, but that money isn’t free. There’s still a time limit to the 0% APR and minimum payments to be made, and it still shifts that credit balance over to the card you wrote the check from.

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