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

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Whenever you’re considering a new credit card, chances are, you’ve got a very specific goal for your finances. Sometimes, it might be earning a generous welcome bonus offer. Other times, it could be getting a low-to-no interest introductory APR offering or racking up credit card rewards.

If you’ve ever weighed a rewards card with a short 0 percent APR period against a card with no rewards and a longer balance transfer period, you might wonder what’s best. On the one hand, you can earn some pretty generous rewards, especially if the card offers a welcome bonus and ongoing opportunities to earn cash back.

If card perks and benefits are added, like cellphone protection or travel insurance, it can sweeten the pot. However, if you are tackling high-interest debt, a longer balance transfer offer could save you hundreds or even thousands of dollars over time.

Let’s take a look at different scenarios that justify a balance transfer card with a longer 0 percent APR offer versus a rewards card with a shorter one, along with the pros and cons of each type of card.

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

Balance transfer credit cards

A balance transfer card’s main feature is that it offers a low-to-no interest for either purchases, balance transfers or both for a limited time. In most cases, the introductory rate is 0 percent for a term anywhere between six months and 18 months, although some cards are now offering up to 21 months at 0 percent APR.

If you are carrying debt on a credit card with a higher interest rate, being able to transfer the balance to another card with a 0 percent APR means you can save a substantial amount of money on interest.

A balance transfer offer can be really helpful when trying to tackle high-interest debt. But, in most cases, these cards will have little in the way of rewards and card perks.

Rewards credit cards

A rewards card offers some type of reward based on how much you use it. In many cases, you can earn rewards with a welcome bonus offer, which typically requires you to spend a certain amount of money on the card in a specific period of time. Then, you may be able to earn ongoing rewards in the form of cash back, points or miles. Many credit cards now offer both rewards and a welcome 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 the Bank of America® Customized Cash Rewards credit card offer a welcome bonus, ongoing rewards and introductory APRs. 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 a rewards card?

Does it make sense to opt for a rewards card with a shorter 0 percent APR offer or a longer balance transfer offer with no rewards? That all depends on what your financial goals are at the time.

If you are paying higher interest on a credit card, your main priority should be paying down that balance and minimizing the interest you are paying. Often, interest fees are unnecessary costs that will eat into the net benefits of your credit card rewards or 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 fees 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 where it makes sense to take advantage of rewards—especially if you’ve got a penchant for travel. For instance, high-end travel credit cards like the Chase Sapphire Reserve® offer generous rewards when you redeem them for travel-related spending. You can also earn more rewards on travel spend with this type of card. Although they typically come with a hefty annual fee, if used correctly, you can justify this fee and maximize long-term value.

You may still be wondering what you stand to gain based on 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® Card

The Wells Fargo Reflect℠ offers no rewards but instead has a 0 percent intro APR of up to 21 months from account opening on qualifying balance transfers (then 14.49 percent to 26.49 percent variable APR), while the Wells Fargo Active Cash® Card offers unlimited 2 percent cash rewards on purchases and 0 percent intro APR for 15 months from account opening on qualifying balance transfers (16.49 percent, 21.49 percent, or 26.49 percent variable APR thereafter). Neither card has an annual fee.

Let’s assume you have another card with a $5,000 balance, an 18 percent APR and a $125 per month minimum payment. If you do nothing and continue to make minimum payments on this card, it will take 22 years and 8 months to pay off, and the amount of interest paid over that time would be $6,923.12—more than double your original balance!

However, if you transfer this balance to the Wells Fargo Reflect card for the 21-month intro APR period, it would only take 43 months to pay off with a total of $503.26 in interest and fees (including the 3 percent balance transfer fee).

With the Wells Fargo Active Cash card, you’d pay $794.84 in interest and fees and pay the balance off in 46 months.

(Note: In both scenarios, we assume your APR after the 0 percent introductory period would be 14.99 percent).

Wells Fargo Reflect℠ Wells Fargo Active Cash
Rewards rate N/A 2% cash rewards on purchases
Welcome offer N/A $200 bonus cash rewards after spending $1,000 in purchases within the first three months
Annual fee $0 $0
Balance transfer intro APR 0% intro APR for up to 21 months from account opening on qualifying balance transfers; 14.49% to 26.49% variable thereafter 0% intro APR for 15 months from account opening on qualifying balance transfers; 16.49%, 21.49%, or 26.49% variable APR thereafter
Purchase intro APR 0% intro APR for up to 21 months from account opening; 14.49% to 26.49% variable thereafter 0% for 15 months from account opening; 16.49%, 21.49%, or 26.49% variable APR thereafter
Potential interest savings on a $5,000 balance transfer $6,420 $6,128

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 rewards on any new 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 current debt), the rewards are null.

All in all, we think those with a high balance to pay off are likely better off sticking to the 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.

That said, some people might be able to balance both debt repayment and new purchases while still paying their new balance in full. If that is the case, you might as well be earning rewards on that spending.

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 a welcome bonus, ongoing rewards and a balance transfer period (though slightly shorter), you can get more value from the rewards cards with all of those features—but only if you can pay your new purchases off in full while still making your debt payments.

In either scenario, weigh the pros and cons of each card, then choose the one that works for you. If you ever need help crunching the numbers on your credit card options, check out Bankrate’s financial calculators to help you choose the best credit card option based on real numbers and your specific financial situation.

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."
Edited by
Associate Editor
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Part of  Introduction to Balance Transfer Credit Cards