Credit cards with 0% APR promotional balance transfer offers are fantastic deals. These cards allow customers to pay off their debt for a specified period without incurring interest. And while many of these offers are included with basic cards that do not offer rewards, there are also some reward cards with promotional balance transfer offers. So what are the advantages and drawbacks of reward cards with balance transfer offers?
A rewards credit card will offer customers some sort of cash back, points, or miles for each one of their purchases. So when cardholders are not paying interest on their card, they are essentially receiving a small rebate on their purchases. Cash back cards typically offer 1% – 2% back on all purchases, with as much as 6% back on transactions from select categories of merchants.
Cards that offer points and miles in travel rewards programs can be even more valuable. Cardmembers who redeem these points or miles for last minute travel and/or premium class flights can see up to ten cents in value for each dollar spent.
These cards make the most sense for those who have a limited amount of debt that they can confidently pay off with in the promotional financing period. When cardholders do this, they can enjoy the rewards these cards offer while they are paying off their debt and beyond, so long as they start paying their statement balances in full each month.
Reward credit cards will invariably offer less attractive financing terms than those without rewards. This will almost always mean a higher standard interest rate. In addition, the promotional terms will probably be less favorable. For example, the Citi Simplicity card offers 18 months of interest free financing on both new purchases and balance transfers, while the Citi Dividend Platinum Select offers only 12 months of promotional financing.
But the real problem with promotional financing and reward cards is psychological. Those who need financing offers are typically those who are unable to spend within their means. Therefore, the last thing that these customers need is an incentive to spend more, which is exactly what reward credit cards can be. So not only will many reward card users be better off with non reward cards with better rates and terms, they may also save more money by being frugal rather than chasing rewards.
When applicants understand the benefits and challenges of reward cars with balance transfer offers, they can make the right decision when they apply for a new credit card.