Reader Question: Should I 0% balance transfer $7700 for $230 just for the miles?

This is another of our Reader Question series of articles.  One of our readers recently asked:

“I received the older version of the US Airways card with 30,000 miles (the current offer is 40,000 mile sign up bonus after spending $1).  As part of that offer they will give me 1 mile/$ transferred up to $10,000.  I have a balance I could transfer for $7700 but they would charge me a 3% fee of $230 to do it.  Is it worth it?”

This is a common question with people who are just Getting Started in the points and miles game.  A good rule of thumb is you shouldn’t pay more than $0.01 a mile to acquire miles and you shouldn’t redeem them unless you are getting at least $0.02 a mile.  If you are purely looking to generate miles and don’t mind paying a little bit to do it then Buying Simon Gift Cards and then Using those Gift Cards to Buy Money Orders at Walmart accomplishes the same thing for $0.0067 a mile (about .67 of a cent per mile).

To see why I came up with these numbers let’s look at redeeming either 25,000 miles for a domestic coach ticket or 60,000 miles for a ticket to Europe.  If you pay 3 cents a mile like the reader is proposing just to get the miles, then that means a “free” domestic ticket would cost you $750 and a “free” ticket to Europe would be $1800.  Both of those are more than just purchasing a ticket outright so it makes no sense.  If you make sure you don’t pay more than 1 cent a point when you generate miles then you will be paying no more than $250 for a domestic ticket or $600 for a European ticket.  Of course if you just use your credit card for day to day expenses, there is no additional cost over what you would have paid cash for so the miles are generated for free.

But if you have a credit card balance that you are paying interest on, then it can certainly make sense to do the balance transfer and be worth paying the fee.  Here is a chart that we made for this article on the Discover Card with an 18 Month 0% balance transfer offer.

Current APR Months before profit after transfer fee
5% 7.2
10% 3.6
15% 2.4
20% 1.8
25% 1.4

So for most people as long as you aren’t going to pay the whole balance in the next 2 or 3 months it makes sense to go ahead and transfer the balance to a 0% card.  And if you are getting miles for the transfer like our reader is, it makes it an even easier choice!

If you have balances you are paying interest on, take a look at the 15 month 0% interest US Airways® Premier World MasterCard®, or the 18 month 0% interest Discover It® card.

As always, reply with any questions and follow me on Google+FacebookTwitter and Instagram to make sure you don’t miss any great info!  And don’t forget to share this article with anyone who might be interested using the handy social share buttons right below this post!

Author: John Butler

I live in Miami Beach but love travelling all over the world.