What is a cheque-to-self?

A cheque-to-self is a way to move funds between accounts held in your name. Here's how it worked for balance transfers in Australia – and what your choices are now.

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Cheques are hardly ever used in Australia any more: they made up just 0.3% of all non-cash transactions in the 2019-20 financial year according to data from the Reserve Bank of Australia (RBA). And features relating to cheques, including a cheque-to-self, have also become rare.

But the term "cheque to self" does still come up, so what exactly does it mean?

In basic terms, a cheque-to-self was offered through some balance transfer cards as an alternative to a conventional balance transfer. With this option, instead of transferring a balance from one account to another, you would request a cheque that you could use to pay off anything.

The cheque amount you were issued then became the balance on your new credit card and was treated as a balance transfer. This meant you could get the benefit of a low or 0% balance transfer interest rate during the introductory period.

Important information about cheque-to-self options

Before 1 October 2019, Citi was the only issuer in Australia that offered a cheque-to-self option on its balance transfer credit cards. This option is no longer available, meaning you cannot get a cheque-to-self balance transfer any more.

The information below has been kept for reference only.

When would a cheque-to-self be used instead of a balance transfer?

A cheque-to-self offered more flexibility than a regular balance transfer, so there are many scenarios when people might have considered this option. These include:

  • To pay off other types of debt. Some debts don't fall into one of the eligible balance transfer categories. For example, a balance with Afterpay or another interest-free shopping service won't be eligible unless it's classified as a line of credit (and many aren't).
  • For medical bills. If you needed to pay for surgery or other health costs upfront, a cheque-to-self balance transfer would have been a way to get the funds and save on interest charges for a set period of time. This could make it more affordable than using a regular credit card.
  • To pay for a mix of expenses. A cheque-to-self meant people could split the value of the cheque across a range of expenses. For example, some money could be used to pay for gifts during the holiday season, some for a holiday and some for property rates and fees.

A few people would also get a cheque-to-self and then deposit the money into a savings account or offset account. This strategy was designed to "earn" money on the value of the cheque. However, the value of the cheque would still technically be borrowed money – which meant this was a risky option that could end up costing a lot more than it was worth.

What other options are available for these scenarios?

While cheque-to-self balance transfers are not offered in Australia, you could consider a 0% p.a. purchase rate credit card for new purchases or a personal loan for existing and/or upcoming expenses. Just remember to compare your options and weigh up all the features and costs before deciding to apply.

Compare long-term balance transfer credit cards

What were the risks of getting a cheque-to-self?

As with any balance transfer or debt product, there were a number of potential pitfalls, including:

  • Not paying off the balance before the introductory period ends. When the low or 0% balance transfer period is over, any debt remaining would be charged interest at the standard rate. This could quickly lead to more debt.
  • Getting more money than you need. The higher the value of the cheque, the bigger your credit card balance would be when this option was available. This meant the minimum monthly repayments would be high, which could also have increased the risk of not paying it all off by the end of the introductory period.
  • Reducing your credit score. Every time you apply for a form of credit, a listing is added to your credit history. This can lower your credit score – especially if you have made several applications in a short amount of time. Your credit score is also affected by how much debt you're carrying, so the balance from a cheque-to-self could have had a negative impact until it was paid off.

How a balance transfer can affect your credit score

Images: Shutterstock

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