Avoiding interest

Avoiding interest
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#1

Ok so I just got a chase Sapphire preferred card to earn rewards for an upcoming vacation. I have a big purchase of 5000 dollars coming up and I want to use this card to get not only the rewards but to get the introductory bonus of 50000 points. The interest rate in this is sky high though and I won’t have the funds to pay it off for a couple months. I want to make the purchase on my chase card get the rewards and then balance transfer to my 0% American Express card. Is there any issue with doing that?


#2

I think that you can easily answer your own question simply by reading the terms on your credit card accounts.


#3

:wave: Hi Winn1200 - welcome the NerdWallet community, we’re really glad to have you!

I’ve moved your question to the Travel & Rewards category to help increase our chances of hearing from other members who may have some experience to share about this! :slightly_smiling_face:


#4

Hi @Winn1200!!

A couple things to consider:

Timing of the purchase

  • If you just got your CSP (Chase Sapphire Preferred), you do have three months to meet the spending requirement. So if you won’t have the cash for a couple of months, you could simply hold off on the purchase till then.
  • You could gain further time by making the purchase immediately after your statement closes and taking advantage of your grace period. Say your statement period ends on the 10th. Make the purchase on the 12th and you will have until the due date of the next statement period to pay without interest. That could be something like six weeks or more. (I am assuming you prefer to pay your balance in full each month, as that’s the only way you would be able to avoid interest entirely). See this article about grace periods for more.

Transferring the balance

  • Depending on what Amex card you carry, you could be looking at a 3% balance transfer fee. 3% of a $5,000 transfer is $150. Depending on the interest rate on your CSP and how long you would carry the debt on your CSP if you didn’t transfer it, the fee could actually cost you more than the interest you’re trying to avoid.
  • Generally, with cards that offer a 0% APR period on balance transfers, the 0% rate is good only for transfers requested within a certain time frame. With most Amex cards, you have 60 days from the time your account has been opened. If your Amex is more than 60 days old, or will be by the time you need to transfer the balance, then you probably won’t get a 0% rate on a transfer.

Hope you have a fun trip planned for your bonus!!!


#5

Well the purchase can’t wait it’s an engagement ring for my girlfriend but paying the 150 might be worth it to get the chase rewards l. I don’t typically spend 4000 in three months the only reason I don’t have the funds is I put a down payment on my car and so I’m waiting for my tax return and the government is slow right now :man_shrugging:


#6

Got it. Well, if you’re sure that you’ll be able to do the transfer (it wouldn’t hurt to call Amex to make sure you’re cool), I would just weigh the $150 transfer fee against the cost of paying a few months’ of interest on the Chase card.

I don’t know what your specific rate is, but here’s a rough calculation using a more or less common rate for rewards cards: At an interest rate of 18%, $5,000 in credit card debt would cost around $75 a month in interest (give or take a couple bucks). So you might well come out ahead if you eat the fee – especially if you think you’ll have to wait several months to get your refund.

Either way, thanks for writing … and good luck!