Does balance transfer count as spending?

The Balance Transfer Fine Print: Why It Doesn’t (Usually) Count Towards Spending Goals

Credit card balance transfers can be a lifeline. They offer the opportunity to consolidate debt under a single, often lower, interest rate, potentially saving you a significant amount of money over time. But before you jump on the balance transfer bandwagon, especially if you’re chasing that shiny new card with its tempting welcome bonus, it’s crucial to understand a key detail: balance transfers generally don’t count as spending towards meeting minimum spending requirements.

Think of it this way: a balance transfer is essentially shifting existing debt from one place to another. You’re not actually “spending” money in the traditional sense of purchasing goods or services. You’re simply moving around existing obligations. This is a critical distinction that often gets overlooked, and it’s a distinction that banks are very clear on (though sometimes buried in the fine print).

Most credit card issuers explicitly state in their terms and conditions that balance transfers, along with cash advances and other similar transactions, do not qualify as eligible purchases for earning rewards or fulfilling minimum spending requirements. This means all the effort you put into transferring that hefty balance could be for naught if your primary goal was to unlock that coveted bonus points haul.

Imagine this scenario: you’ve just signed up for a credit card offering 50,000 bonus points after you spend $3,000 within the first three months. You’ve got a high-interest credit card with a balance of $3,000, so you decide to transfer it to the new card. You pat yourself on the back, thinking you’ve instantly met the spending requirement. Unfortunately, you’re likely mistaken. The $3,000 balance transfer won’t count towards your required spending, and you’ll still need to make actual purchases totaling $3,000 to get those bonus points.

Why is this the case?

Credit card companies offer welcome bonuses to incentivize new spending and build customer loyalty. They want you to use their card for everyday purchases. Balance transfers, while beneficial for consumers consolidating debt, don’t generate new revenue for the issuer in the same way that retail transactions do. The bank is essentially just taking on existing debt, not facilitating new purchases.

What should you do?

Before initiating a balance transfer with the aim of meeting a spending requirement, meticulously review the terms and conditions of your new credit card. Look for specific language that clarifies what qualifies as an eligible purchase for earning rewards.

Instead of relying solely on a balance transfer, focus on using your new card for your regular spending – groceries, gas, bills (if allowed and advantageous), and other everyday expenses. Plan your purchases strategically to reach the required spending amount within the designated timeframe.

The Takeaway:

While balance transfers can be a valuable tool for managing debt, they shouldn’t be considered a shortcut to fulfilling minimum spending requirements for credit card welcome bonuses. Understanding this crucial distinction can save you from disappointment and ensure you actually reap the rewards you’re hoping for. Always read the fine print and strategize your spending to maximize the benefits of your new credit card.

#Balancetransfer #Creditcards #Spending