You can earn rewards on balance transfer cards, but you won’t earn rewards on your transferred balance. You can still earn cash back, miles or even points on new spending – but you’ll immediately accrue interest.
Dear Cashing In,
I have a balance of about $2,000 on a credit card that has high interest, so I’m looking to get a card with lower interest rates. Can I earn rewards on a new balance transfer card? – Rick
Credit card rewards can be a helpful and lucrative benefit that many cards have. You can earn cash back or frequent flyer miles, as well as points that can be redeemed for travel or other perks.
However, the best advice is that if you are carrying a balance on a card – or if you have trouble paying your bills on time – you really shouldn’t be shopping around for a rewards credit card.
That’s because any rewards that you earn will be meager compared to the money you spend on interest charges or late fees. Instead, focus on paying off your balance and on lowering that monthly payment by finding a card with a lower interest rate.
The short answer to your question: Yes, there are cards that make sense for balance transfers that also happen to offer rewards. But you shouldn’t let the promise of rewards be the deciding factor in choosing a card.
See related: How rewards work if you pay off your balance early
Rewards and balance transfers work better apart
Also, before you choose a balance transfer rewards card, you should know you do not earn rewards on the amount of a balance transfer. You earn rewards only on new spending. And if you’re carrying a balance, you’ll pay interest immediately on any new spending.
Let’s look at some examples. If you look at the best balance transfer credit cards, you’ll notice a wide variety of cards from different issuers. The cards on this list tend to have lower interest rates than other cards – as well as introductory balance transfer APRs of 0% for 12 to 21 months.
Let’s say, right now, you have a $2,000 balance on a credit card that has 25% annual interest. According to CreditCards.com’s payoff calculator, it would take payments of around $190 per month to pay off your credit card balance in 12 months.
But if you transferred your balance to a balance transfer card with a promotional rate of 0% APR for 12 months and a 3% balance transfer fee, you could pay off your balance in 12 months by making payments of $172 per month. You would also save around $221 in interest, net of fees of $60. Use CreditCards.com’s balance transfer calculator to make your own calculations.
You won’t pay interest on that balance, but you will pay immediate interest on any other charges. So, you won’t earn rewards on that balance.
If you are dead-set on earning rewards, you might want to separate the cards that have balances with those that have rewards. In other words, don’t try to earn rewards with cards on which you carry balances, because you will pay interest on those charges.
Instead, if you qualify for a rewards-earning card, don’t carry a balance on it. Rather, carry the balance on a card with low or introductory zero interest.
It’s better to focus on paying down your debt than worry about rewards. But if you absolutely must have a rewards card, make it one where you are not paying interest for the privilege of earning rewards.