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A balance transfer can be a good way to consolidate debt or take advantage of a promotional interest rate. However, if you're considering a balance transfer to a rewards credit card, you may be disappointed to learn you won't earn rewards on the transferred balance.
Can You Earn Rewards With a Balance Transfer Credit Card?
Balance transfer credit cards attract new customers with low or 0% promotional interest rates on balance transfers. These cards often also include a rewards program offering cash back, miles or points on eligible purchases. While you can't earn rewards on a balance transfer specifically, you can still earn rewards on other qualifying purchases based on your credit card rewards program.
Balance transfers aren't the only kind of transaction excluded from earning rewards. Other ineligible transactions often include:
- Interest charges
- Fees, including annual fees
- Cash advances
- Cash-like transactions, including money orders or foreign currency purchases
- Lottery ticket purchases
- Convenience checks
- Unauthorized or fraudulent charges
These are some common exclusions, but your card issuer may have others. Check your credit card terms and conditions to learn which transactions won't earn rewards.
While you can't directly earn rewards on balance transfers, they can still be rewarding. For example, if you have a $5,000 balance on a card with a 24% APR, you might decide to transfer this balance to a card offering an 18-month 0% promotional APR. After factoring in a 5% balance transfer fee, you could potentially save $750 if you pay off the balance during the promotional period.
You can maximize your balance transfer value by paying off the full balance before the promotional period ends. After that, the card's regular APR kicks in and the remaining balance will begin accruing monthly interest.
Should You Use a Balance Transfer Card to Earn Rewards?
You may consider using a balance transfer card to earn rewards to avoid opening a new credit card. Or, if you're currently shopping for cards, you may look for a card that will continue to offer value after you've paid off the balance transfer. In either case, it's best to wait until you've paid off the balance transfer before trying to earn rewards. This is especially important if the promotional rate applies to balance transfers and not purchases. Here's why.
When you're carrying a transfer balance, new purchases won't receive a grace period. Instead, purchases start accruing interest right away. To avoid interest charges, you'll have to pay off your entire balance by the due date—including the purchases and transfer balance.
If you opt for the balance transfer, be sure to pay it off before you start using the credit card on purchases and earning rewards. Keep in mind that paying interest can offset the value of any rewards you earn. Be sure to pay the balance in full every month to avoid debt and interest.
The Bottom Line
If the rewards program on your balance transfer credit card doesn't match your spending, you can shop around for a rewards card that's better suited for you.
You generally need to have good to excellent credit to qualify for the best rewards credit cards. Before applying for a new credit card, check your credit score to see where you stand. This way, you can apply for the credit cards that match your credit profile.