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Be Careful with Balance Transfer Checks

Smart Balance Transfers provides in-depth information and insights into credit cards. While we do accept Smart Balance Transfers provides in-depth information and insights into credit cards. While we do accept compensation from credit card companies when consumers visit their websites, we have striven to provide unbiased reviews since 2007.

A few months ago, a visitor wrote to Smart Balance Transfers to tell us that a balance transfer check she received in the mail bounced when she tried to use it.  I had hoped this was an isolated issue, but a second visitor wrote in yesterday with a new balance transfer check horror story.   Here’s what Rob had to say:

“I received some balance transfer checks from one of my Chase credit card accounts. I used the check to make a payment of $25,000k to my Bank of America credit card, to get a lower interest rate with Chase. When BOA went to cash the check to cover my payment, Chase DENIED the check. So I got hit with a $40 check returned fee. But to top that off, BOA bumped my entire balance to 19.9% instead of 10.9%. BOA said when I made the payment that my balance was cleared, but when the check was returned, they had to put the balance back on my card under “cash advance” now at 19.9%. They said this is “standard practice with all banks”. So I got screwed by Chase AND BOA. I have used those balance transfer offers many times in the past. Didn’t realize that they could decline payment on them. Guess I learned a valuable lesson.”

Now, as in the first case, the offending bank was Chase.  And, in this case, BOA was “kind” by only increasing the interest rate to 19.9% instead of the standard default rate of 29.99% (Who would have thought only doubling an interest rate would be considered kind, but it actually is?)  Now, balance transfer checks don’t show up in the mail as often as they used to.  However, they are starting to make a comeback.  Unfortunately, they should not be trusted.

In the fine print of those checks, most banks state that they have the right to refuse any balance transfer or cash advance check.  This was clearly the case here, as the bank probably didn’t want to take on a large 0% balance.  However other factors, like credit limit decreases, can also cause a check to bounce.  In a nutshell, there is a small, but definite chance that any balance transfer check could be declined for any reason at any time.  And this can prove very, very costly for consumers.  Rob, whose story was the inspiration for this article, will pay over $2000 in penalty interest this year just for trying to use a check delivered to him by his credit card company.  If BOA was more aggressive, they could have charged him $4000.  Most other banks would have.

The only way to avoid the issues encountered by Rob is to shred balance transfer checks.  If you stand to save money with a balance transfer, apply for a new credit card online and transfer balances.  The new credit card company will honor the balance transfer request or deny it.  But getting denied when you apply for a new card will not cause your rate to double or triple as a bounced balance transfer check will.  In fact, there is no risk when you apply for a balance transfer credit card.  And even though these bouncing balance transfer check incidents may be rare, they still pose a threat to your financial well being.  That is a risk that is not worth taking.

For more information on balance transfer credit cards and to apply online, please see the credit card application section of this website.

Editor's Note: This content is not provided by Citi. Any opinions, analyses, reviews or recommendations expressed here are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by the Citi or any of the other companies whose products are featured in this content.

About the author

Jeff Weber

Jeffrey Weber has been following and blogging about the credit card industry since 2004. He has also written for Forbes and been cited in a wide range of major media outlets including USA Today, Time, MSN Money, The Christian Science Monitor, The Detroit Free Press and numerous other prestigious online and print publications.

Jeffrey resides in Easton, Connecticut and enjoys spending his free time chasing after his two year old son, watching films with his wife and occasionally taking a holiday to go snorkeling.

– has written 279 posts.

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