I have several cards on 0% or low APR BT Offers, and those CC have also made me offers for cash back if I use the card for purchases. How can you do this, if the card is already on a BT, without destroying the low APR on the BT? Easy.
An important thing to understand about your credit card statement is that your statement balance can have multiple APR on several different portions of the balance. In this Bank of America example, I’ve got two separate 0% APR with different expiration dates, balance transfers left over from earlier at the purchase APR, and purchases at the standard purchase APR. The amounts shown are not the ending balance, but rather the average balance during the credit card statement period. (even this average balance isn’t exactly what the interest is charged on, because CC interest is charged on a daily percentage, resulting in daily compounding)
Before Congress passed the CARD Act, most CC agreements would apply ALL payments to the lowest APR first, meaning in the above example the ~$8k on the two 0% APR would be paid first, all $8k, before even beginning to pay on the ~$500 at the purchase APR. This is a favorable purchase APR, but imagine if the purchase APR was at 19%? To make matters worse, the interest on the purchase APR items would usually add to the Purchase balance, and continue to compound the interest cost on the purchases until all the lower APR items were paid off however many months that took. Needless to say, in the old days it was not a good idea to use your credit card for regular purchases if you had a BT on the card.
That all changed with the CARD Act a few years ago. Since the credit reforms of the CARD Act, credit card issuers are allowed to apply the minimum payment to the lowest APR items first. However, after the minimum payment, they must apply payments to the highest APR items. The minimum payment depends on statement balance, but is often only 1% to 2% of that statement balance. In the example above, the statement balance of almost $8k required a minimum payment of only $82. This would be applied to the approximately $8k 0% APR balance first. Any additional payments above the $82 for the month would be applied to the highest APR items next. Actual interest charges usually fall into the higher APR buckets.
On the BofA cards, I get little offers for 10% cash back from certain national merchants. HairMasters, Starbucks, Buffalo Wild Wings, Papa Murphy’s, and several others are regularly available to add the offer to the card, use it at the merchant for one purchase, and get 10% cash back. With my Citi Diamond Preferred, I also had a $600 BT offer on the $1k CL, then got a 5% back on $500 of purchases in gas, groceries, restaurants and department stores. My Discover card had several thousand on a 0% BT, then they sent me a “spend $1,000, get $100 back” offer. My US Bank Cash+ has a low APR BT offer, and 5% categories for Department stores. How do you take advantage of the spend offers and not get interest charges?
You usually have to accept / sign up for the spend offer, to add it to the card, so do that first.
When you use the card for any of the offers, depending on the spend involved in the offer, just keep track of those as they post to your CC account online during the month. You have to wait until the charge amount actually posts to your credit card account, so it is no longer Pending. After it posts, it will be in the “Purchases” bucket of the daily interest charge calculations. Said differently, you cannot prepay these charges, you have to wait for the amounts to show up as Posted on your account online. It only takes a few days after you did the purchase, and you don’t have to wait until the statement cuts to see the amounts, but they do have to post to your account. After a few charges have posted, use the Make a Payment button on your credit card account to arrange an electronic payment from your checking account, to post the same day or in a few days. If you know when charges will hit, you can also schedule such a payment for a few days after, to allow time for the charges to post. Repeat this throughout the month if the spend offer is a long term thing.
The amount of the payment you make must cover the Minimum Payment first. I’ll often just send over the minimum payment right after the statement prints, just to get it out of the way. I owe the amount, the BT needs to be paid off, and the Minimum Payment is a small amount anyway. I’ve also got Autopayments set up for all these accounts, which is intended to pay the BT offer over a schedule. I don’t use the Autopayment amount in my calculations of paying the purchase amount, although they would be applied to the purchase amounts.
By paying the purchase soon after it posts, and after the minimum payment has been made, the interest rate clock never really gets started on the purchase amount. You may see a minimum interest charge of $0.50 if the card charges that, but often I don’t even get that amount if the payment is soon enough after the charge was posted.
Chase Slate and Freedom cards are actually even easier. You can use the Blueprint Full Pay payment selector features to tell Slate the types of charges you want to include as pay in full, and they will add those new charges to your Blueprint payment to pay them above the minimum payment that is going toward the BT payment, and not accrue any additional Purchase interest. The Finish It allows you to set an additional amount you want to pay toward the BT (or purchase charges) principal over the minimum payment, to make the payments faster.
So, the point of this is, if you have a BT offer on a card, you don’t have to effectively SD the card, it can be used for purchases to take advantage of special offers, or even for regular charges, without added interest cost.
@Anonymous-own-fico wrote:I'm not sure whether to agree, because if you pay the minimum following the statement date and then charge something that you soon pay off, we are talking about two different billing cycles.
Not really. Once you BT to a card, all new purchases have the interest rate clock as soon as the charge posts. No more grace period. So you want to pay the minimum to get that taken care of, then if you do new charges, pay those soon after they post, because you can pick them off out of that APR bucket. (does not have to be daily payments, can be weekly to catch up and pay recent groups of new charges)
And, to other posters, yes if there are no rewards, it can be a lot easier to SD 
When Discover stacks BT offers with 10% Cash Back offers, however, it's Game On!