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How do credit card balance transfer checks work?

If you have an unsecured credit card of any kind, you’ve probably received balance transfer checks in the mail. From a distance, these controls seem harmless – and even useful. Simply write a check in your name and deposit it in your own bank account. From there, you can use that money to pay bills, make a purchase, or save for emergencies.

Sounds good, right?

Unfortunately, the devil is in the details when it comes to balance transfers or “convenience” checks. While being able to write yourself a check for any amount may seem ideal, it means taking on more debt. Worse, balance transfer checks tend to add fees that make borrowing that money particularly expensive.

Keep reading to learn more about how they work and the pitfalls to avoid.

How do balance transfer checks work?

Although credit card checks tend to look the same, they can come with very different offers. For example, some credit card checks you receive in the mail come in the form of a genuine balance transfer offer. When this is the case, writing one of these checks yourself means scoring 0% APR on those funds for 12-21 months.

However, if you read all the details, you might find a nasty surprise. While some balance transfers may be free, others charge a balance transfer fee of up to 5% of your balance transferred up front. If you write yourself a check for $5,000, for example, you will owe up to $250 more and more of the money you borrowed.

In some cases, the checks you receive in the mail do not come with a 0% APR offer at all. They may be disguised as helpful balance transfers or convenience checks, but they may actually be just a cash advance.

If you read the fine print of the offer, you may find that you have to pay a cash advance fee of up to 5% to use your checks, then pay a higher interest rate to get started . Worse still, credit card checks intended for a cash advance offer no grace period. If so, interest will begin to accrue on your balance when you deposit the check into your account.

Consumer Warnings Against Credit Card Convenience Checks

the Consumer Financial Protection Bureau (CFPB) has warned of deceptive business practices with balance transfer checks and cash advance checks in the past. The warnings are the result of concerns about “the marketing of credit card interest rate offers such as balance transfers, deferred interest offers and convenience checks,” the CFPB says.

“As part of these promotions, consumers are often required to pay a fee to transfer a balance or make a purchase with their credit card in order to receive a promotional interest rate on that amount for a specified period,” writes the CFPB. “Although consumers pay no interest or a low interest rate for promotional balances, any additional purchases consumers make with the credit card may incur interest charges immediately.”

That’s why it’s crucial to read the fine print of any offer you’re considering. Either way, you have to remember that 0% APR offers won’t last forever and every dollar you borrow must be repaid. In the case of cash advance checks, you will want to determine exactly how much this loan will cost you. Oftentimes, cash advances are incredibly expensive when you factor in upfront fees and ongoing interest charges.

Alternatives to convenience checks

If you really need access to cash, a balance transfer check might not be the worst idea. Nevertheless, it is important to read the fine print to determine your interest rate and the terms of the new loan before signing on the dotted line. You also need to consider whether you will pay an upfront fee to use a convenience check in the first place.

Also consider other loan alternatives that might put you in a better position once you factor in all interest charges and fees. In some cases, a personal loan from a bank or credit union may offer a better interest rate and better terms.

If you’re looking for a 0% balance transfer offer, you might be better off signing up for a new balance transfer credit card with low fees and zero interest for the first year or more. It is at least worth checking whether the offer you received in the mail is as good as the other options available.

As always, you should compare offers, fees, and interest rates to find the best option for your needs.

[This article was first published on The Simple Dollar in 2020. It was updated in March 2022.]