How rewards and points work when doing a balance transfer
Quick insights
- Typically, lenders do not offer rewards points or cash back for moving a balance from one account to another.
- Rewards are typically awarded only for new purchases, meaning the amount you transfer will likely not contribute to your points balance.
- Understanding credit card points, transfer fees and limits may be factors to consider before initiating a balance transfer.
Balance transfers may lower interest, but they rarely earn rewards like points or cash back. Still, moving high-interest debt to a low introductory annual percentage rate (APR) credit card may be beneficial, potentially allowing you to pay down debt faster and save on interest charges. Below, we explore ways balance transfers impact rewards programs, including what happens to rewards when you close a credit card account, limits on moving rewards and more.
How balance transfers interact with rewards programs
If you're considering a balance transfer, you may be wondering whether balance transfers count towards points or other incentives. In almost every instance, the act of transferring debt from one account to another is considered a non-purchase transaction. Because rewards are typically reserved for eligible new purchases, you generally will not earn rewards when you transfer an existing balance. This policy exists because lenders view these transfers as administrative actions rather than revenue-generating commerce.
While the transfer itself does not generate rewards, it may still be beneficial. By moving high-interest debt to a credit card with a lower intro APR offer, you may reduce the amount of money paid in interest charges each month. With some offers, the promotional APR applies only to balance transfers, not new purchases, so new charges may accrue higher interest. Additionally, new spending increases your balance and could slow your progress toward paying off the transfer.
Understanding the limits on moving rewards
If you're transferring a balance, you usually cannot transfer rewards between credit cards from different issuers, so any rewards you've accrued will remain in your old credit card account after a balance transfer. Here are some limits your card issuer may place on rewards:
- Program expiration rules: Most rewards programs require an account to remain open and in good standing to maintain a points balance. If you close your original card after moving the debt, you might forfeit any accumulated rewards that were not redeemed first.
- Transferability across brands: Some credit cards allow you to move points to airline or hotel partners, though this is separate from moving a financial balance. You can check if your new account offers similar partner transfers.
- Impact of delinquency: If the account you are moving debt from has a history of late payments, your rewards might be suspended. Ensuring all accounts stay current during the transition process may be a helpful way to protect your earned points.
- Reward forfeiture clauses: Many cardmember agreements state that rewards are lost if the account is closed by either the customer or the bank, so you may choose to redeem your points before you finalize the migration of your balance to a new institution.
Please note that you generally can’t transfer a balance between two accounts from the same issuer. Reviewing the terms of your old card's rewards program may help you decide what to do with your rewards and if you want to keep the account open.
Managing credit card points and balance transfer fees
Before you finalize a balance transfer, you may wish to consider any available redemption options.
- Travel partner transfers: Moving your rewards to an airline or hotel loyalty program can sometimes provide different value than other redemption methods. You may wish to check the specific transfer ratios.
- Statement credits: Redeeming your existing rewards for a statement credit may be a straightforward way to lower your current balance before the transfer. If available, this process can reduce the total amount of debt you eventually move to your new account.
- Gift card redemptions: Some issuers allow you to trade your points for gift cards at popular retailers or restaurants. While the value per point might be slightly lower than travel, this may be an option for smaller points balances.
- Merchants and shopping: Using your points to pay for purchases through select online merchants may be another way to utilize your rewards. You can review the checkout options on your favorite sites to learn whether your account is eligible for this feature.
- Account-to-account moves: You may sometimes have the option to move your rewards to a different credit card account with the same financial institution. This strategy can help safeguard your points from expiration if you plan to keep at least one other account open with the bank.
The bottom line
A balance transfer may be a helpful tool for debt management rather than a way to accumulate immediate rewards points. While the transfer itself does not typically earn points, it may help provide a lower interest rate for a period of time. By minimizing interest costs, more of your payments may be applied to the balance transfer.
