Do You Get Rewards on Balance Transfers?

A balance transfer involves moving debt from one credit card to another, often to consolidate balances or take advantage of a lower interest rate, such as a 0% introductory annual percentage rate (APR) period. This strategy helps individuals manage debt more effectively by reducing accrued interest. While balance transfers offer significant financial advantages by making it easier to pay down principal, they generally do not earn credit card rewards.

How Credit Card Rewards Work

Credit card rewards programs are designed to incentivize card usage for new purchases. These programs typically offer points, miles, or cash back on eligible spending. Rewards are generally calculated as a percentage of the transaction amount or a fixed number of points per dollar spent on goods and services.

Certain types of transactions are excluded from earning rewards. These exclusions commonly include cash advances, interest charges, annual fees, and late payment fees. Credit card issuers define eligible transactions within their terms and conditions, focusing on consumer spending that generates merchant fees for the card network.

Do Balance Transfers Earn Rewards

Balance transfers are considered a form of debt management rather than a purchase. Therefore, they do not qualify for credit card rewards. The primary purpose of a balance transfer is to shift existing debt, often to benefit from a lower interest rate, rather than to acquire new goods or services. Credit card companies structure their rewards programs to encourage spending that generates revenue for them, and debt movement does not serve this purpose.

Even balance transfer fees, which can range from 3% to 5% of the transferred amount, generally do not earn rewards. These fees are treated as charges for the service of moving debt, not as a transaction for a tangible item or service that would yield points or cash back. While a balance transfer credit card might offer a rewards program, those rewards are earned only on eligible new purchases made with that card, not on the transferred balance itself.

Strategic Implications for Rewards Programs

While a balance transfer does not directly generate rewards, it can indirectly support a cardholder’s overall rewards strategy. Successfully transferring and managing debt under a lower interest rate can free up financial capacity. This improved cash flow can then be allocated towards making new, eligible purchases on other reward-earning credit cards or even on the balance transfer card itself, after the introductory APR period concludes and the balance is under control.

Consolidating debt through a balance transfer can help a cardholder optimize their credit utilization, which is the amount of credit used relative to the total available credit. A lower utilization ratio can positively influence credit scores, potentially enabling access to more favorable credit products, including those with appealing rewards structures. This strategic debt management can maximize future reward earning opportunities through responsible spending on eligible transactions.