Keeping miles on transferred balances
 

Okay, I just thought of a question (hypothetical for now, but possibly a reality in the future) and thought I'd come to the experts: If I have a balance (money due) on a miles-earning credit card and then do a balance transfer to ANOTHER miles-earning CC, I won't lose my miles, will I? After all, a balance transfer is merely a "payment" (yes, I still owe the amount, but as far as the first CC is concerned, that balance would have been "paid off") so it shouldn't matter whether I'm paying it off via cash or another card.

Before any financial gurus jump on my back, let me reiterate: I *know* switching cards and transferring balances isn't often a good idea and that I would *still* owe the money (which I would continue to pay off), so this is not a play on the old "Can I use my MasterCard to pay my VISA bill?" joke.

What I have here is an opportunity to not only transfer balances to a new card that will earn me miles for said balances in the process, but also do so at a lower APR and annual fee than the first card. In essence, I will end up getting "double miles" (miles from the first card and miles on that same amount from the card awarding transfer miles). The first card company shouldn't care, since, as I said, the transfer is merely a "payment" and people earn miles -- permanently -- when they make the purchase, not as long as they're carrying a balance.

Still, being on these boards for a few weeks now has taught me not to take *anything* for granted and to be aware of all sorts of obscure rules or T&Cs. Comments, please! Thanks.

You are correct that it is sometimes possible to earn miles twice this way. You will not forfeit your miles on the original card.

But it only works when miles are offered for balance transfers - which is usually not the case.

However, if you have a good enough offer for a balance transfer, this might be a good idea.

My personal experience is that balance transfer offers that earn miles aren't as good as balance transfers without miles.

IE, My United Card offered me 5.9% fixed APR on balane transfers + up to 2,500 miles per transfer check. But I have received offers in the past from them for 2.9% fixed APR without the miles on balance transfers.

To avoid fees, I think you would have to be in a promotional period with the "second card". Typically, a balance transfer is treated similar to a cash advance and interest starts accruing on day 1 - in addition to the balance transfer fee. So just make sure you read the T&C on the card that you're transferring the balance to so you'll understand (1) what fees you'll be paying and how much, therfore, the miles will be costing you and (2) verify that you'll actually earn miles on the balance transfer (again, typically only possible during a promotional period).

I just happened to be looking at the United Mileage Plus Platinum VISA card last night ($85 annual fee, 15,000 bonus miles after first use). I forget the time period, maybe the first six months, that you could earn another 10,000 bonus miles for balance transfers or convenience checks (at a rate of 1 mile for every $2.00 transferred). However, the fee on the balance transfer (or check) is 3% of the transaction amount - which seems to get pretty steep, pretty quick at $30/thousand. However, I think the T&C also said that the maximum balance transfer/check fee was $50. So, theoretically, you could get 25,000 miles for $135 ($85 annual fee earning 15,000 miles and a $20,000 balance transfer costing $50 earning 10,000 miles). The only question I have there is whether there would be a "balance transfer limit" that would keep you from doing a $20,000 balance transfer.

Of course, the easy way to do this would be to forget about balance transfer and just write a $20,000 convenience check to yourself. Deposit it in the bank and then pay off your credit card as soon as the charge posts. You'd pay the $50.00 fee, and maybe a day or 2 of interest (which is a whopping $10/day for a $20,000 balance at 18%), but nothing else. If you've got the spare cash, it might even be possible to send a check to your credit card company first to create a $20,000 credit balance in your account before the convenience check even posts - then you'll pay no interest (wouldn't it be great if the CC company would pay you 18% on that credit balance?).

I'm done rambling now.

Thanks for your feedback
 

I appreciate all the tips. If you're curious, here's the deal: the offer is from American for the Aadvantage card, with 15K miles upon getting the card, and a 1 mile/$ transferred up to 10K miles with no fees. The APR isn't great -- 13.99% for regular, and only 9.99% APPR until Nov. 2004 and then 13.99% thereafter.

So it's not exactly a "great" deal but might be worth signing up for the AA miles (where I have 27K) and only to transfer a small balance that I'd be paying off anyway during the next month or so. For general purposes, the APR isn't great but it's on par with my Mileage Plus VISA and the annual fee ($50 for this vs. the $75 or so I've got with United) it might be worth looking to switch over to this one (UA and AA, in that order, are the programs I've got most miles in). We'll see... I may or may not pursue this, but thanks for your thorough input and help! :)

I just received an offer from Bank of America Alaska Airlines visa- convenience checks to make balance transfers or payments, 0% interest until 10/04, zero fees, good until the end of June. I don't think it said anything about earning miles but if it does it's a no brainer. If it doesn't, it still may be a good deal to get 0% interest for awhile. Is there a catch that I am not seeing?

You need to read the T&C's carefully. In most cases, credit card companies will apply future payments to borrowings with the lowest interest rate first, then the next highest interest rate, and so on. The net effect of this policy is that if you transfer a signficant balance at 0% and then make future purchases on the same frequent flyer credit card at the regular rate (10%+), your future payments will go first towards paying down the balance transfer while the interest accrues on your purchases.

For that reason, I would be hesitant about transferring large balances to frequent flyer-earning credit cards with the intent to leave the balance largely unpaid during a promotional rate period because the credit card company is effectively penalizing you for using the card in the future for purchases. However, if you can earn miles on a balance transfer and also have the ability to pay it off immediately, I would say go for it. I've considered doing this on a Midwest miles credit card from Juniper Bank.

sgosline, ExitRowAisle brings up some good points, but other than that, you don't have to worry about anything. I've done the "zero percent balance transfer" thing a couple of times and it's worked out well because it was for amounts that I was planning on paying off (or mostly paying off) during the same amount of time as the promotional period. The best deals I've gotten on balance transfers, though, have been no-fee transfers at 4.9 and 5.9 percent (I did this twice) for the LIFE of the debt... meaning the low APR is permanent until I pay that off, and recently, a transfer at zero percent from now until August of 2005, which "buys me time" (I can continue to pay off that balance without the added costs of interest fees) but again you need to keep in mind the points that ExitRowAisle brings up. I get "pre-approved" letters ALL the time (at least three per week) and toss just about all of them... I'm not big on juggling cards and it's not good for your credit record to switch often, but the truth is that once in a while it can be good to do so, especially since you'll get a better APR than you would even at a bank for a personal loan! And if you get miles in the process, all the better. :)

Now, one more question... my boyfriend and a couple of other people are really big fans of their 3% or 5% cash-back gas cards, saying they're a better value than miles-earning cards since miles are valued at about $.02/mile at best. I still think if you play your cards right (planning on using a domestic ticket, for example, for a long trip, such as coast-to-coast) earning miles is a better deal. Your thoughts?