Here’s an issue I’ve been seeing a lot of lately.
Nowadays, credit card issuers are offering some pretty enticing deals to get customers in the door.
In fact, it’s not entirely uncommon to see cash back bonuses of $500 or more, for spending say $3,000 during the first three months of card membership.
Unfortunately, these lucrative deals can land a credit cardholder in trouble in a hurry.
Credit Card Issuers Aren’t Stupid
After all, credit card issuers aren’t stupid, they know full well how the game is played.
I liken it to a casino, which offers “free drinks” while you play slots or Blackjack. Sure, the drinks don’t need to be paid for, but after you lose $100 in an hour, you’ve basically paid a premium for your drinks (depending on how many you managed to order).
The same is true with credit card bonuses. If you’re not smart, that $500 cash back bonus could turn into years of costly finance charges, which could easily eclipse the money you “made” via the bonus.
So let’s assume you went nuts spending money on your credit card to reach that bonus level, only to realize that you can’t actually pay the money back.
If you’re savvy, you may have focused on finding yet another credit card to pay off the balance, via a credit card balance transfer.
This way, you’ll be able to avoid finance charges, at least for 12 months or so, by taking advantage of a 0% APR period.
But you may be wondering if this will negate your cash back rewards.
They Don’t Care Who Pays Your Bill
Not to worry. Even if you racked up $5,000 in credit card purchases to claim a reward, the card issuer won’t care how you pay off the balance.
Once the money is spent, and the reward is claimed, you can pay off the bill however you’d like.
If you elect to use a balance transfer, that’s perfectly fine. The way the bank sees it, it’s just like you making the payment.
[Does a balance transfer work like a normal credit card payment?]
When you execute the balance transfer, the credit card issuer will receive payment for whatever amount you specify.
They get their money, your balance is paid off (hopefully in full), and you worry about tackling the debt on the new balance transfer credit card.
The original rewards credit card issuer won’t be able to come after you for your reward or make you relinquish your “points.” Sure, they may be disappointed that you wriggled out of their carefully laid trap, but there’s nothing they can do about it.
A balance transfer payment is a payment like any other, and it means you’ve met your obligations. The rewards earned are yours and you can move on.
You Can’t Earn Rewards Both Ways
There is a caveat: If it’s the other way around, you probably won’t get rewards or earn points with the balance transfer credit card issuer.
In other words, once you transfer your original balance to the new credit card issuer, they won’t give you rewards for the transferred balance as well.
So essentially you can’t earn double rewards, otherwise you’d be able to transfer your balance from credit card issuer to credit card issuer and earn cash back and whatever else, without ever really paying off your balance.
This wouldn’t make a lot of sense to credit card issuers, and explains why rewards are typically only reserved for new purchases.
Read more: Credit card balance transfers and rewards.