Balance transfer or rewards card with a shorter intro APR: Which is right for you?

If you’re carrying credit card debt, initiating a balance transfer can help you make repayments without accruing more interest. But it wouldn’t hurt to also earn rewards on new purchases as you pay down debt.

Balance transfer cards typically offer a 0 percent intro APR for a longer period of time, which buys you time to transfer a balance from another card and begin paying it off interest-free — but they don’t usually earn rewards. Some rewards cards, however, also offer balance transfer options (typically for a shorter period), 0 percent intro APRs on new purchases for several months and the ability to rack up rewards on your new spending.

Let’s look at the two types of cards in more detail, including when each might be useful.

What’s the difference between a balance transfer card and a rewards card?

Balance transfer credit cards

A balance transfer credit card generally offers a low-to-no interest period on balance transfers for a set length of time (typically between 6 and 21 months). After that, a higher regular annual percentage rate (APR) kicks in. You may also face a balance transfer fee that’s around 3 to 5 percent of the balance.

If you’re carrying debt on a credit card with a higher interest rate, transferring the balance to a 0 percent APR balance transfer card can help you save a lot of money on interest. But balance transfer cards generally lack rewards and other perks, which can make them less desirable to hold for the long term.

Rewards credit cards

Rewards credit cards, on the other hand, offer cash back, points or miles that accrue as you spend. Some rewards cards also offer welcome bonuses and 0 percent intro APR windows to incentivize new cardholders. If these cards also come with a balance transfer option, they could be a viable way to pay off existing debt while also earning rewards on new purchases.

For example, the Capital One SavorOne Cash Rewards Credit Card, Wells Fargo Active Cash® Card, Blue Cash Preferred® Card from American Express and Citi Custom Cash® Card all offer cash back rewards, welcome bonuses and 0 percent intro APRs on both purchases and balance transfers for a limited time. That said, you’ll see that these introductory periods tend to be shorter than those offered by balance transfer cards.

Should I choose a balance transfer card or rewards card?

One of the main factors when it comes to choosing a balance transfer versus a rewards card is how much you can afford in monthly repayments. Balance transfer cards tend to have longer intro periods, which let you divide your balance into smaller chunks. Rewards cards may have shorter intro periods that can mean bigger balance repayments upfront, but a greater earning potential down the road.

In both cases, your goal should be to repay your credit card debt before the intro period ends. After that, high regular APRs are likely to kick in, and you may find yourself in even more debt.

To see the difference between these two types of cards in action, consider the following cards from the same issuer — both of which offer balance transfer options:

Wells Fargo Reflect® Card vs. Wells Fargo Active Cash® Card

The Wells Fargo Reflect® Card is a tried-and-true balance transfer card, offering a 0 percent intro APR for 21 months from account opening on qualifying balance transfers made within 120 days. The card charges a 5 percent balance transfer fee (minimum $5) and a variable APR of 18.24 percent, 24.74 percent or 29.99 percent after the introductory period ends. It doesn’t have an annual fee, but it also doesn’t offer rewards or a welcome bonus.

The Wells Fargo Active Cash® Card is a rewards card, offering unlimited 2 percent cash rewards on purchases, plus a $200 cash rewards welcome bonus after spending $500 within your first three months. It also offers a 0 percent intro APR for 15 months from account opening on purchases and qualifying balance transfers, followed by a variable APR of 20.24 percent, 25.24 percent or 29.99 percent. This card charges a 3 percent intro balance transfer fee ($5 minimum) on transfers within the first 120 days, and a 5 percent fee after that.

Which card would make more sense for your financial situation? Let’s pretend you’re transferring a $5,000 balance to either the Wells Fargo Reflect or Active Cash card. We break down how much you’ll need to pay per month to pay down your debt within each card’s introductory period.

Using a balance transfer card with a longer intro period

If you transfer a $5,000 balance to the Reflect balance transfer card within the first 120 days, the balance transfer fee brings you to a total balance of $5,250. You’ll need to pay $250 a month during the 21-month intro period to wipe out your debt.

If making lower monthly payments during the intro period is most important to you during your debt repayment, then choosing a balance transfer card with a long intro period can help free up additional space in your budget.

Using a rewards card with a shorter intro period

If you instead transfer that $5,000 to the Active Cash rewards card within the first 120 days, your total balance including the balance transfer fee would be $5,150. You’ll need to pay just over $343 a month during the 15-month intro period.

If you can afford the higher monthly payment, then a rewards card with a shorter intro period can help you earn more rewards on future purchases, while also enjoying the card’s $200 welcome bonus. As a result, the card has more long-term value, meaning that you may not need to apply for a new card at the end of your debt repayment journey in order to maximize your ongoing rewards.

The bottom line

At first glance, it might seem like a longer balance transfer offer will be easier on your wallet. You can make smaller monthly payments while still paying off your debt and avoiding interest fees during the intro period.

But consider a rewards card’s earning potential, welcome bonus and other perks. You might decide that, even with a shorter intro period, the card is worth more — as long as you can make the monthly payments.

Need help deciding which type of card is right for you? Check out Bankrate’s best balance transfer credit cards and weigh the pros and cons of each before applying.