Best Credit Cards for Balance Transfers and Travel Rewards

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Credit is an important tool; a sound financial standing can not only get you lower rates for mortgages and other loans, it can also help get you approved for the best rewards credit cards. Today, TPG Senior Points & Miles Correspondent Jason Steele offers tips on how to use balance transfers to manage your credit so you can get in on the top offers.

Here’s a statistic that you don’t often hear when talking about travel rewards credit cards: According to the most recent Gallup Poll on credit card use, about half of all American users carry a balance on their cards at least some of the time. While these numbers have declined over the last ten years, still about one third of credit card users say they carry a credit card balance every month.

Travel rewards credit cards can be incredibly lucrative, but the value you get from them disappears quickly if you’re carrying a balance with a high interest rate. Excessive debt can damage your credit score and keep you from taking advantage of the best credit card sign-up bonuses, and a lot of would-be award travelers are sitting on the sidelines of the points and miles game because they’re not sure how to get out from under their existing balances.

Today I’ll explain how you can fight fire with fire by using credit cards that can actually help reduce your debt, along with some that can even earn travel rewards along the way.

Chase
Credit cards that offer a 0% APR can help you reduce (or eliminate) debt. Photo courtesy of Shutterstock.

Credit cards that help you get out of debt

Since credit card debt is unsecured, it has a higher interest rate than a typical mortgage or car loan, and it’s never tax deductible. So if you’re constantly paying interest charges on your credit card balance, then your first priority should be to pay off that debt and avoid future interest charges.

If you (or someone you know) has used a credit card to get into debt, then it may also be possible to use a credit card to get out of debt. The key is to open an account that offers 0% APR balance transfers. These offers are kind of like sign-up bonuses, in that they extend valuable benefits to new applicants, but instead of (or occasionally in addition to) earning points or miles, you receive interest-free financing on any balance you transfer to the new account. In addition, most of these offers also feature 0% APR financing on new purchases.

However, to really take advantage of a promotional financing offer, you have to combine it with a sound plan to pay off your debt. This should involve reducing your expenditures, maximizing your income, and making regular payments toward the principal balance. So long as the 0% APR is in effect, you won’t pay any interest charges, allowing you to save money while eliminating your debt sooner.

By law, these balance transfer offers with promotional financing must be valid for at least six months, and the top offers currently available can extend for as long as 18 months. The vast majority of balance transfer offers include a balance transfer fee (generally around 3% of the amount transferred) that gets added to the new balance. Yet this fee is far less than the cost of interest that would otherwise be paid over the course of the promotional financing offer.

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Your first priority should be reducing debt, but if you can earn travel rewards along the way, go for it. Image courtesy of Shutterstock,

Travel rewards and financing offers

For most people with credit card debt, trying to earn rewards while paying down the balance isn’t the best strategy. Rewards credit cards invariably have higher interest rates than similar non-rewards cards, and cardholders who are struggling with debt are the last people who need a rewards card that gives them an incentive to spend more money.

Nevertheless, some cardholders feel that so long as they’re paying down their debt and temporarily avoiding interest, then they can safely earn rewards on their spending. If you do get a rewards card with a 0% APR offer, keep in mind that you won’t earn points, miles, or cash back rewards on the amount of the balance transfer or any balance transfer fees. Occasionally, some card issuers offer a sign-up bonus on the amount transferred, but that’s not the case with any current offers.

The most competitive balance transfer offers currently available

These offers vary in the terms and benefits offered, but all of them feature a 0% APR on balance transfers that can help you consolidate other credit card debt.

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Chase Slate offers a 0% APR for 15 months and no fees for transfers in the first 60 days.

Chase Slate

For several years now, Slate has been the only card offered with 0% APR promotional financing on balance transfers, that also comes with no fee for balance transfers within 60 days of account opening. New applicants receive 15 months of interest free financing on balance transfers and new purchases, and there’s no annual fee. Beyond the first 60 days, there is a  3% balance transfer fee.

While Slate doesn’t offer any rewards, it’s my top choice among the cards on this list, as any rewards offered by other cards are unlikely to be worth the customary 3% balance transfer fee. Note that Chase (like other card issuers) will not accept balance transfers from cards that it issues. So if you have debt on one or more Chase cards, you’ll have to find another bank that offers a promotional balance transfer.

Citi Diamond Preferred and Simplicity

These two Citi cards offer 18 months of interest free financing on both new purchases and balance transfers, with a 3% balance transfer fee. Simplicity features no late fees or penalty interest rate, while Diamond Preferred offers several purchase protection and travel insurance policies often found on rewards cards. Neither card offers rewards, but both have no annual fee.

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The Discover it card gives you cash back, as well as access to the ShopDiscover shopping portal.

Discover it

This card comes in two flavors. One features 18 months of interest free financing on balance transfers, and six months of 0% APR financing on new purchases, while the other offer has 14 months on both. There’s no annual fee for this card, but there is a 3% balance transfer fee.

The Discover it card is also a rewards card that earns 1% cash back on all purchases, and 5% cash back on up to $1,500 spent each quarter at select merchants. For the first quarter of 2015 (January, February, and March), the bonus categories are gas and ground transportation (such as rental cars, buses, taxis, and trains). You also get access to the ShopDiscover online shopping portal, which offers 5-20% cash back at over 200 retailers.

See TPG’s review of this card from last year for more information.

The preview of the Chase Freedom 5% cash back categories for 2015 includes groceries, restaurants and gas stations.
Chase Freedom’s 5% cash back categories for 2015 include groceries, restaurants and gas stations.

Chase Freedom

Freedom offers 15 months of interest free financing on both new purchases and balance transfers, with a 3% balance transfer fee. New cardholders also receive a $100 sign-up bonus in the form of 10,000 Ultimate Rewards points after spending $500 within three months of opening an account. If you also have the Sapphire Preferred or Ink Plus, then points earned on the Freedom card can be transferred to airline and hotel partners.

Like the Discover it card, Freedom features 1% cash back on all purchases, and 5% cash back on up to $1,500 spent each quarter at select merchants. For the first quarter of 2015, the bonus categories are grocery stores, movie theaters, and Starbucks. There’s no annual fee for this card, but there is a 3% balance transfer fee.

Amex
Amex Everyday and Everyday Preferred earn Membership Rewards points.

Amex Everyday and Everyday Preferred

These are solid travel rewards cards, but they also offer 15 months of interest-free financing on both new purchases and balance transfers, with a 3% balance transfer fee. The standard, no-fee Everyday card offers a sign-up bonus of 10,000 Membership Rewards points plus a year of Amazon Prime after spending $1,000 within three months of account opening. You’ll earn double points at US supermarkets on up to $6,000 spent each year (1X thereafter), plus a 20% points bonus when you use your card to make at least 20 transactions per statement period.

The Everyday Preferred version has an annual  fee of $95, and offers a sign-up bonus of 15,000 Membership Rewards points plus a year of Amazon Prime after spending $1,000 within three months of account opening. You’ll earn 3X points at US supermarkets on up to $6,000 per year in purchases (1X thereafter), and 2X points at US gas stations. In addition, you receive a 50% points bonus when you use their card to make at least 30 transactions per statement period.

See TPG’s introduction of both cards from last year for more info, and check out this comparison of Everyday Preferred and Chase Sapphire Preferred by TPG Special Contributor Eric Rosen.

Barclaycard Arrival miles are both versatile and valuable for travelers.

Barclaycard Arrival and Arrival Plus

These cards offer 12 months of interest free financing on both new purchases and balance transfers, with a 3% balance transfer fee. The standard Arrival card with no annual fee offers 20,000 bonus miles after spending $2,000 within 90 days of account opening. It earns double miles on travel and dining, and one mile per dollar spent on all other purchases.

The Arrival Plus offers 40,000 bonus miles after spending $3,000 within 90 days of account opening, and earns double miles on all purchases. The Arrival Plus has an $89 annual fee that is waived the first year. Barclaycard miles are worth one cent apiece as statement credits toward travel related expenses, and holders of both cards receive a 10% rebate on their miles redeemed.

See TPG’s review of the Arrival Plus from last year.

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