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Longer balance transfer offer or shorter offer with rewards: Which is the better strategy for you?

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When you’re considering a new credit card, chances are you have a specific financial goal in mind. It might be earning a generous welcome bonus, getting a low-to-no interest introductory APR or earning statement credits.

If you’re weighing a rewards credit card with a short-term 0 percent APR against a card with no rewards and a longer intro period, you might need help determining which is the better option for you. On the one hand, you can earn some pretty generous rewards, especially if the card offers a welcome bonus, adding to the card’s long-term value. However, if you’re tackling high-interest debt, a longer zero-interest period could save you hundreds or even thousands of dollars over time.

Let’s take a look at different scenarios that justify a balance transfer credit card with a longer-term 0 percent APR offer versus a rewards card with a shorter one.

What is the difference between a balance transfer card and a rewards card?

Balance transfer credit cards

A balance transfer credit card’s typically offers a low-to-no interest period on balance transfers (and, in some cases, purchases). The introductory rate is usually for a term anywhere between six months and 21 months.

If you’re carrying debt on a credit card with a higher interest rate, transferring the balance to a 0 percent APR credit card means you can save a substantial amount of money on interest.

A balance transfer offer can be helpful in tackling high-interest debt. But in most cases, the longer the offer, the less the card features in terms of ongoing rewards and perks.

Rewards credit cards

A rewards credit card offers ongoing rewards in the form of cash back, points or miles. Many rewards cards today offer both rewards and a welcome bonus (also known as a sign-up or introductory bonus). For the most part, rewards cards are not designed to help you pay off high-interest debt, but rather to maximize earnings on ongoing spending. But in some cases, you can find both rewards and a 0 percent introductory offer on the same card.

For instance, cards like the Chase Freedom Flex℠, Citi Custom Cash℠ Card and Bank of America® Customized Cash Rewards credit card offer a welcome bonus, ongoing rewards and introductory APRs on both purchases and balance transfers.

On the flip side, these introductory periods tend to be much shorter than those on cards specifically designed for that purpose.

Should I choose a balance transfer card or rewards card?

If you’re paying significant, high-interest credit card debt, your main priority should be paying off that balance and avoiding interest charges for as long as possible. Often, interest charges are unnecessary costs that will eat into your earnings or the value of your added benefits.

For instance, if you earn $600 in combined rewards from a credit card welcome bonus, ongoing rewards and credits in a given year but end up paying $800 in interest on that same credit card, you’ve essentially lost $200. Ideally, you would use the credit card benefits and rewards but not carry a balance so as to avoid interest and fees.

However, there are times when it makes sense to take advantage of rewards — particularly if you don’t need an exceptionally-long period of time (anything longer than 18 months) to pay off your debt and you prefer a card with solid long-term value.

You may still be wondering what you stand to gain in both scenarios, so let’s take a look at two credit cards with balance transfer offers from the same issuer.

Wells Fargo Reflect vs. Wells Fargo Active Cash

The Wells Fargo Reflect® Card offers no rewards or welcome bonus but instead has a 0 percent intro APR of up to 21 months from account opening on both purchases and qualifying balance transfers (followed by a variable APR between 15.99 percent and 27.99 percent). You’ll receive a 0 percent APR for the first 18 months, then an extension of three months with on-time minimum payments during the intro period.

The Wells Fargo Active Cash® Card offers an unlimited 2 percent cash rewards on purchases, plus a $200 cash rewards welcome bonus after spending $1,000 within your first three months. It also offers a 0 percent intro APR for 15 months from account opening on purchases and qualifying balance transfers (followed by a variable APR of 17.99 percent, 22.99 percent or 27.99 percent).

Both cards charge an introductory 3 percent balance transfer fee ($5 minimum) for the first 120 days, after which the fee bumps to 5 percent.

Spending example

Let’s assume you transfer a $5,000 balance to either the Wells Fargo Reflect or the Active Cash.

If you transfer your debt to the Reflect within the first 120 days, you’re looking at a total balance of $5,150 (including the balance transfer fee). If you make on-time payments each month, you’ll pay just over $245 a month for 21 months in order to wipe out your debt.

If you instead transfer your debt to the Active Cash within the first 120 days, your total balance (including the balance transfer fee) would also be $5,150. With the card’s intro offer, you’ll pay just over $343 per month for 15 months to pay off your credit card debt.

The kicker here is that while the Reflect card will save you more in interest, the Active Cash offers you the opportunity to earn 2 percent cash rewards on any spending. Assuming you can pay off any new charges on the card in addition to your minimum payments, that cash back can make up the difference. Still, if adding new purchases to your card will only run up your balance to more than you can pay off (in addition to your current debt load), the rewards are null.

If you have a high balance to pay off, you’ll be better served by a longer balance transfer period. You’ll save more in interest in the long run, and you’ll avoid the temptation to rack up more debt.

The bottom line

At first glance, it might seem that a longer balance transfer offer could be the way to go. However, when you factor in the potential for a welcome bonus and ongoing rewards, you could get more value from a rewards card with a slightly shorter intro offer — but only if you can pay your new purchases off in full.

Need help determining which option is right for you? Read through Bankrate’s list of the best balance transfer credit cards for additional guidance, and be sure to weigh the pros and cons of each before applying.

Written by
Aja McClanahan
Personal Finance Writer
Aja McClanahan is an author, blogger and speaker on personal finance and entrepreneurship. Aja is the author of "How a Mother Should Talk About Money with Her Daughter."
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Part of  Introduction to Balance Transfer Credit Cards