[Disclosure: Emily and I get a commission for certain credit cards in the post. You don't have to use our links, but we're very grateful when you do!]
Million Mile Secrets reader Nandan writes in:
Can you please advise what credit cards can:
1. Provide 0% on Balance Transfer and 0% APR for next 12 months to 18 months and
2. Provide 20,000 and above bonus miles on purchases ($1,000 or more)
What Are 0% APR Cards?
A balance transfer is when you apply for a card and use the credit line from your new card to pay off the balance on an older credit card. In other words, you’ve transferred the balance from your old card (which charged higher interest rates) to your new card (which charges lower interest rates).
The benefits of a balance transfer is that you can pay less interest on your outstanding credit card debt.
The Annual Percentage Rate or APR is a way to express the interest rate which you pay on a credit card if you carry a balance. 0% APR cards try to get you to believe that you will not pay interest (hence 0% APR), but that is not always true. There are often extra fees built into the fine print.
0% APR cards can be confusing. That’s because there are 4 types of cards which all advertise “0% APR.”
- True 0% APR cards on Balance Transfers and Purchases with NO fees
- 0% APR cards on Purchases Only
- 0% APR cards on Balance Transfers and Purchases WITH Balance Transfer fees
- 0% APR cards on Balance Transfers only WITH Balance Transfer Fees
There isn’t any ONE card which meets all of Nandan’s requirements.
Before Nandan applies for ANY credit card – 0% APR or miles and points credit cards – he should make sure to read the 5 Dangers of Applying For Credit Cards.
You shouldn’t open miles and points credit cards if you carry a balance because miles and points credit cards usually have higher interest rates than other credit cards. You’ll pay much more in interest costs than what your miles and points are worth!
Be Very Careful
And you really shouldn’t be carrying a balance on credit cards unless you know what you’re doing.
My first credit cards were 0% APR credit cards. I was in college and had to get a car to get to and from my summer internship. I had a Capital One and Bank of America card which both sent me checks which I could use with a 0% APR and NO fees.
So I bought a very used Ford Escort and financed the entire purchase with no interest! This worked out well for me, but if I missed any of the minimum payments on the card, I would have had to pay very high default interest rates. So don’t play with 0% APR offers unless you have LOTS of discipline and attention to detail.
Nowadays, most credit cards, and especially miles and points credit cards, usually do NOT have pure 0% APR offers with NO fees. There is almost always a fee to transfer balances with miles and points cards, which is why you’re better off with cards like the Chase Slate which charges no transfer fee for a 0% APR balance transfer.
You should also be careful of not maxing out your credit line because that decreases your credit score.
Let’s look at some of the 0% cards and see which ones are better than others.
1. True 0% APR on Balance Transfers & Purchases & NO Fees
Link: Chase Slate
The Chase Slate card is the only card which does NOT charge a fee to transfer a balance or for purchases and has a 0% APR on BOTH purchases and balance transfers for 15 months.
Note that there is no balance transfer fee if you transfer a balance during the first 60 days. After 60 days, there is a 3% transfer fee with a minimum fee of $5.
However the Chase Slate does not give you any miles and points for signing-up for the card.
But he should be VERY carefully with this approach. He should apply for the Chase Slate card first. If he applies for the Chase Slate card 2nd, he would be in a pickle if he is denied and has no card to transfer his balance! He’ll pay high rates of interest if can’t transfer the balance to a 0% APR card.
2. 0% APR ON PURCHASES ONLY
1. Barclaycard Arrival Plus™ World Elite MasterCard®
The Barclaycard Arrival Plus™ World Elite MasterCard® offers a 40,000 point signup bonus (worth ~$440 in travel) after spending $3,000 in the first 3 months and has a 0% APR on purchases for the first 12 months.
The no-annual fee Barclaycard Arrival™ World MasterCard® has the same 0% APR offer on purchases, but gets you only 20,000 points as a sign-up bonus.
0% APR on purchases means that you don’t pay interest on your purchases for a certain period of time.
But a 0% APR on purchases is NOT the same as a 0% APR on balance transfers (where you transfer the balance from one card to another).
The Barclaycard Arrival Plus™ World Elite MasterCard® has a 4% balance transfer fee or $10 (whichever is greater). AND the 0% APR does NOT apply to balance transfers on the Barclaycard Arrival Plus™ World Elite MasterCard®!
So, sure, you can pay 0% APR on your purchases, but you will pay dearly for a balance transfer (if you assume that it is 0% APR as well).
If Nandan transferred $5,000, it would cost him $200 in balance transfer fees (4% in Balance Transfer fees X $5,000) PLUS 14.99% or 18.99% depending on which interest rate he gets approved for based on his credit worthiness.
So don’t use the Barclaycard Arrival Plus™ World Elite MasterCard® card for a balance transfer! But it is worth it to take advantage of 0% APR on purchases.
3. 0% APR on Purchases & Balance Transfers + Fees
Some cards have 0% APR on purchases and balance transfers, but charge a fee for balance transfers.
1. Chase Freedom
Link: Chase Freedom
The Chase Freedom has a 10,000 Ultimate Rewards points sign-up bonus after spending $500 within 3 months along with 0% APR on purchases and balance transfers for the first 15 months.
But the Chase Freedom has a balance transfer fee of $5 or a 3% (whichever is greater).
So Nandan would pay a balance transfer fee of 3% if he transferred a balance to the Chase Freedom. For example, he’d have to pay $150 in fees if he transfers $5,000 ($5,000 X 3% Balance Transfer Fee).
I like the Chase Freedom because of the rotating categories in which you can earn 5% cash back or 5 Ultimate Rewards point per $1.
2. Citi Diamond Preferred
Link: Citi Diamond Preferred
The Citi Diamond Preferred has 0% APR on purchases AND balance transfers for the first 18 months. This is the longest 0% APR offer.
But there is a $5 or 3% balance transfer fee (whichever is greater) when you make the transfer. I’ve included the Citi card in this list even though there is no sign-up bonus because some folks may want a non-Chase card.
3. Discover it
Link: Discover it
But Discover charges a 3% balance transfer fee. I’ve included the Discover card in this list even though there is no sign-up bonus because some folks may want a card that’s not issued by Chase.
4. 0% APR ON BALANCE TRANSFERS ONLY + FEES
1. Barclays US Air
Link: Regular Offer for 30,000 Miles US Air Card (with landing page)
Some 0% APR miles and points cards offer 0% APR on balance transfers only. But they charge a fee to make the transfer, so you are still paying for the transfer (regardless of the proclamations of 0% APR).
If Nandan makes a purchase with the 0% APR balance transfer card, he would pay high rates of interest on purchases, if the purchase is not paid off in full by the due date on his monthly statement.
For example, the official Barclays US Air card offers 30,000 US Air miles AND a 0% APR on balance transfers for the first 15 months. But there is a 3% balance transfer fee during the first 15 month.
To be clear, this isn’t the best offer for the US Air card (even though it pays me a commission), but it has a landing page which details the terms of the offer.
You are better off using these links from FlyerTalk which gets you 5,000 more miles without the annual fee for the 1st year. The links from FlyerTalk do not have a landing page, but still work.
If Nandan transferred $5,000, it would cost him $150 in balance transfer fees (3% Balance Transfer fee X $5,000), but he’d get a 0% APR rate for the 1st 15 months.
This could make sense for Nandan if he is paying a higher rate of interest elsewhere or knows that he can earn more than $150 over the life of the balance transfer. Or if he is willing to pay $150 for 30,000 to 35,000 US Air miles which is worth it to me.
But he’d pay ~16% or ~25% (depending on his credit worthiness) on purchases if he mistakenly assumed that the balance transfer rate also applied to purchases.
Should You Do A Balance Transfer?
If you can’t afford something now, don’t buy it now. Save up for it and then buy it.
But balance transfers can make sense if you are paying high rates of interest elsewhere or you know what you’re doing.
For example, Nandan should only make a balance transfer if he can keep track of the balance and pay it off in full when the 0% APR promotion period ends.
Nandan might get approved for a miles and points card, but might not get a 0% APR card with a large enough credit line to transfer the balance.
If you can’t pay your balance in full each month, you shouldn’t apply for new miles and points credit cards unless you know what you’re doing or to save on interest fees elsewhere. And you shouldn’t max out your credit limit with a 0% APR because your credit score will decrease.
There is NOT a perfect card which offers a large sign-up bonus, 0% APR on purchases and balance transfers and which has no balance transfer fees.
The Chase Slate card is my favorite card overall because of the true 0% APR offer with no balance transfer fees. But the Barclaycard Arrival Plus™ World Elite MasterCard® is good for 0% APR on purchases only.
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