Balance Transfer Rewards

Balance transfers are pretty rewarding because they can save you lots and lots of money by avoiding costly interest charges.

But a lot of consumers may get tripped up thinking that they can also earn rewards simply by transferring a balance.

Though many rewards credit cards come with corresponding balance transfer offers, they typically specify that you will not earn rewards on the balance transfer amount.

A Typical Balance Transfer Credit Card Reward

Credit card balance: $2,500
Balance transfer offer: 0% APR for 12 months, 14.99% thereafter
Balance transfer fee: 4%
Rewards: 1% cash back on all purchases

Notice in the example above that the balance transfer credit card offer comes with cash back rewards, but they’re reserved for purchases only.

In other words, if you transfer your existing $2,500 credit card balance, you won’t earn 1% in rewards for simply paying it off.

You’ll only earn rewards on new purchases exclusive to your balance transfer amount. This is the bank’s way of combating balance transfer arbitrage, where cardholders shift the debt from credit card to credit card without paying much of it off.

So technically someone could transfer $5,000 to a balance transfer credit card that offers 1% cash back, then transfer it again elsewhere, thereby paying off the balance. The original balance transfer credit card issuer would then owe the person $50 in cash back rewards, which wouldn’t make a lot of sense.

Balance Transfer Rewards Are Enticing, But Could Derail You

Many balance transfer credit cards offer rewards to entice you to use the credit card for everyday use, instead of just to take advantage of the 0% APR or the low fixed rate for the life of the balance.

This is pretty much why credit card issuers offer balance transfer credit cards, with the hope you’ll eventually use them as your everyday credit card.

They are also betting that you won’t pay off all the debt during the promotional period or you’ll slip up and pay fees.

In summary, it doesn’t hurt to pick a balance transfer card that offers good rewards in case you end up using it long term. But it’s not wise to make purchases on a balance transfer credit card, as you’ll essentially be mixing up two separate balances, which could confuse things and slow down your goal to pay off debt.

It is recommended that once you transfer a balance to a credit card, you store that credit card in a safe place and NOT use it for purchases. That way you can get out of debt quickly. Once the debt is paid off in full, you can entertain the idea of using the card as your everyday credit card. But until then, put it away.

As always, be sure to assess your unique situation to determine what’s most important, good credit card rewards or a good balance transfer offer.

Some Real World Examples

Stop the presses! Chase now offers rewards points on balance transfers via their popular Freedom card, meaning you can offset the balance transfer fees, and potentially make yours a no fee balance transfer.

Additionally, some other card issuers, such as Barclaycard, offer bonus points when you transfer a balance.  Unfortunately, many of these cards don’t offer 0% APR on balance transfers, so you’re essentially transferring debt for the sole purpose of obtaining the bonus, whether it’s worthwhile or not.  Often times, it’s not!

I stumbled upon a balance transfer offer from Delta Community Credit Union that gives you 1.5% cash back on transferred balances, but the catch is that the APR is in the double-digits. Kind of senseless.

However, there’s (rather amazingly) at least one offer out there that gives you cash back and 0% APR on balance transfers. Not sure how they do it or if it’ll last, but such an offer does exist!


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