Longer balance transfer offer or shorter offer with rewards: Best long-term strategy

A long balance transfer offer can be an excellent tool for credit card debt repayment. A few extra months of 0% intro APR on your balance transfer can give you more room in your budget by allowing you more time to pay off the debt.

However, the longest balance transfer offers typically come without rewards. At the same time, some rewards credit cards offer 0% intro APR on balance transfers, but for a shorter time. With this type of credit card, you’ll have to pay off your debt faster (or pay interest), but you’ll also get more in long-term value.

Which is the best strategy? Let’s compare a couple scenarios.

Scenario 1: A rewards credit card is a better long-term option

You have $10,000 of credit card debt at 16% APR to pay down, and you can afford to pay $500 per month. If you continue paying it off, it’ll take you 24 months to finish, and you’d pay $1,709 in interest.

Let’s say you get the Citi® Diamond Preferred® Card, which gives you 0% intro APR for the first 21 months on balance transfers (13.99% to 23.99% variable thereafter). You’d pay off your debt just in time before the intro period expires and save $1,209 in the process, taking the balance transfer fee of 5% into the account. That’s some significant savings.

However, if you got the Citi® Double Cash Card instead, you’d have the first 18 months of 0% intro APR on balance transfers (14.24% to 24.24% variable thereafter) ­– four months shorter than with the Diamond Preferred. With the same $500 per month payment, it’d also take you 21 months to pay off your balance. You’d pay $339 in interest, but you’d still save $1,370, comparing to sticking to your original credit card.

Further, with Citi Double Cash, you’d earn 2% on every purchase (with unlimited 1% cash back when you make a pucrhase, plus an additional 1% when you pay it off). Even if you waited to start making purchases on your card until after you were done paying off your transferred balance (which we recommend), you’d start earning rewards by the end of your second year with the card.

We estimate yearly earnings with this card to be around $318 annually with $15,900 yearly spend. This means that after 34 months with this card (a year after you’d be done repaying your transferred balance), you’d get $1,688 in value from this card, almost matching your savings with the Diamond Preferred. After another year, the value would grow to $2,006, significantly surpassing that of the Preferred.

As you can see, in this scenario, the Diamond Preferred would save you more in the beginning. The Double Cash, on the other hand, would be a better choice in the long term, as it would quickly match the Preferred’s value and keep earning you rewards.

Scenario 2: A longer balance transfer offer makes more sense

Now let’s say that you owe $15,000 at 16% APR. It would take you much longer (39 months) to pay off this sum, and you’d lose $4,284 to interest.

With the Diamond Preferred, you’d pay this debt off six months sooner and save $3,004 in the process, minus interest and balance transfer fees.

With the Double Cash, it would take you 35 months to pay off your debt, and you’d save $2,147 in interest, compared to staying with your original credit card. At this rate, it’d take you almost three years to get the same value you’d get from the Diamond Preferred.

Three years is a long time in the credit card world. During this time, you may qualify for more lucrative credit cards and choose a different card entirely for your rewards strategy.

In this scenario, you’re better off with the Diamond Preferred.

A better alternative: Product change

If you need a long balance transfer term, but you also want to earn rewards once you’re done paying off your debt, you might be able to get both.

Once you pay off your balance with your balance transfer card, consider a product change. For instance, Citi is rather generous when it comes to product changes and may choose not to limit you to one family of cards. In our scenario, if the issuer approves the change, you may switch from the Diamond Preferred to the Double Cash once you’re done paying off your debt.

See related: How to upgrade a Citi card

Of course, Citi may not allow you to do that. Product changes are evaluated on a case-by-case basis. But if you can pull it off, this option can offer the best of both worlds, allowing you to use the card that makes the best sense for you at different stages in your financial journey.

Bottom line

When choosing between a balance transfer card with a longer 0% APR and no rewards and a card with shorter intro APR that does offer rewards, do your math first. You can use our balance transfer calculator to help you find the best payoff solution.

Generally, the higher the debt amount, the more sense it makes to go with the longer-term balance transfer card.