Does a balance transfer count as a purchase?
A new balance transfer credit card can offer several benefits, including lower interest rates, an introductory APR, no annual fee, and more.
But does a balance transfer count as a purchase?
In this article, we answer this as well as some frequently asked questions in relation to it. We’ll also point you in the direction of some great balance transfer credit cards.
In short, the answer is no for a majority of the credit cards out there today.
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Unfortunately, a balance transfer does not count as a purchase, just like a cash advance. And since it’s not a purchase, you won’t earn rewards or points on a balance transfer.
Even if you open a balance transfer card account with a sign-up bonus, you'll have to make eligible purchases to gain the bonus.
However, there may be certain exceptions. For example, a credit card might give you cash back on a transferred balance during a promotional period. But this offer is quite rare.
With that said, let’s go through some FAQs.
Here are answers to some FAQs that’ll give you a better idea of balance transfers, purchases, cards, points, and payments.
Many credit card issuers will clearly specify transactions that don't count towards rewards. These often include a balance transfer and some others, including:
- A cash advance
- Any interest and fee charges
- A returned purchase
- Purchase or reloading of prepaid debit cards (often known as gift cards)
- Purchase of other cash equivalents like money orders, lottery tickets, traveler’s checks, foreign currency, etc.
Minimum spend is the least amount of money you must spend on your credit card within a specific time to unlock the sign-up bonus.
And since a balance transfer is often a huge transaction, it’s possible to assume that you might have hit the minimum spend by transferring multiple balance transfers.
But, since balance transfers don't count as purchases, that’s not the case.
Other costs like a balance transfer fee, annual fee, or cash advance fee also don’t count towards a minimum spend, either.
Balance transfers are typically a blessing for many when trying to save money on interest charges with the 0% APR period.
But it has its share of concerns you must know of:
i) Making a Payment or New Purchase With Your Card
Your balance transfer card may offer attractive rewards encouraging you to spend. But if you’ve made a balance transfer to get out of credit card debt, this might be a concern.
Accumulating more credit card debt by spending money on your balance transfer card can void the grace period on eligible purchases. That means interest charges apply to them.
ii) Paying Less Than the Minimum Payment
It’s always best to pay off each new purchase in full, every month by the due date.
Luckily, a credit card issuer may let you make a minimum payment instead of the entire credit card balance.
But the catch is, if you make less than the minimum payment by the due date, your card issuer may consider it a late payment and activate a penalty APR (Annual Percentage Rate).
So it’s best to find out this information before applying for a balance transfer card.
iii) Forgetting to Make a Payment
Making a late payment or missing a payment altogether can result in the cancellation of your promotional 0 interest or APR period - meaning you’ll have to pay interest charges on your transferred balance.
Your interest rate can also skyrocket if you forget to make a payment. Remember, variable penalty APRs can go up to 29.99% depending on the card issuer.
iv) Not Qualifying for the Promotional 0% APR Offer
Even if your credit card is approved, it doesn’t guarantee the 0% APR (promotional 0% interest rate) offer.
If you have a bad credit score, your credit card issuer may charge you a higher interest rate.
Yes, a balance transfer counts as payment in most cases.
The credit card company you owe will treat it as a regular payment.
This credit card company will receive the payment, and the new credit card company (that offered you the balance transfer credit card) will allocate it against your new card account.
The only difference from your monthly card payments is that you don’t make this payment. Instead, it’s made for you by the credit card company that you transfer the debt balance to.
Balance transfer checks work a lot like a balance transfer credit card.
Except, balance transfer checks are paper checks provided by your credit card issuer.
The checks allow you to transfer a credit card balance from one credit card to another. Instead of your new credit card issuer making a direct payment on your behalf, you’ll write a check against one credit card to pay off another credit card balance.
Remember, the transferred balance amount cannot exceed your balance transfer card’s credit limit.
Yes, balance transfers can be done to an existing card, especially if the card issuer is conducting a promotion. However, the existing card and the card whose balance you want to transfer usually need to be from different credit card companies.
However, do consider the consequences of adding a large credit card balance to an existing card. It’ll impact your credit utilization ratio (the percentage of available credit that's been used), which is an important part of your credit score.
If you have a balance in your existing card, adding more will increase the credit card balance on one card. And if your credit utilization is higher than 30% of your credit limit (the recommended credit utilization rate), it can hurt your credit score.
Here are some quick tips to make the most of your balance transfer card:
- Before applying for any of the best credit cards, create a strategy to pay off your debt ASAP – preferably before the intro APR period expires to avoid paying interest charges.
- Avoid any new purchase, as it’ll add more debt to your credit card balance.
- Look for a balance transfer card with an introductory balance transfer offer or no balance transfer fee.
- Set up automatic payments to ensure no late or missed payment fees or penalty APR applies.
Now, if you’re ready to make the most of your balance transfer card but don’t know which one to pick, there are plenty of balance transfer credit card options available.
Here are 3 of the best balance transfer cards in the market today. Some even feature cash back and rewards systems.
Is a Balance Transfer Still Worth It?
Since a balance transfer doesn’t count as a purchase, it won’t earn you any rewards or points.
However, if you're trying to pay back a credit card debt, a balance transfer sounds perfect in most cases. It’s better to take full advantage of the introductory 0% APR. This way, you can save on interest charges and later enjoy the rewards offered by the card.
If you’re looking for the best credit cards for a balance transfer, check out our balance transfer card list.