Are Balance Transfers a Good Debt Solution? Maybe not.
- A balance transfer can be a good way to consolidate credit card debt.
- Dave Ramsey sees balance transfers as just one way to move your debt.
There may come a point where you find that you are juggling several different credit card balances at once. Maybe you found yourself with some emergency home repairs that you had to finance. Or maybe he just lost track of his spending, which happens to the best of us.
In any case, if you now have a series of credit card debt to manage, you may be considering a balance transfer. With a balance transfer, you transfer your existing balances to a new credit card so you can focus on paying off that one balance.
Doing so can make your life easier, and in many cases, with a balance transfer offer, you’ll get a 0% introductory rate on your new card. That could give you some relief from accumulating interest while you work to reduce your debt.
But while a balance transfer may seem like a good solution to your credit card debt problem, financial expert Dave Ramsey thinks otherwise. And he may want to take his advice to heart.
The downside of balance transfers
Why is Dave Ramsey opposed to balance transfers? It’s simple: Ramsey really hates debt and believes consumers should avoid it at all costs. When he does a balance transfer, he doesn’t get out of debt, he just changes the way his debt is housed, so to speak.
As Ramsey says on his blog, “A credit card balance transfer is just another way to keep you stuck in the cycle of debt.” That is a cycle that can be very difficult to break out of.
Also, while it’s common for balance transfer offers to give you a 0% interest rate on your debt at first, eventually, that introductory rate can run out. Once that happens, you’ll often be subject to a variable interest rate that can actually increase over time.
Also, balance transfers are generally not free. Credit card companies charge fees for the option to transfer your debt. And just as Dave Ramsey is not a fan of interest, he is not a fan of fees either.
Also, Ramsey warns, if your credit score isn’t in great shape yet, you may not even qualify for a balance transfer in the first place. And if you have a lot of debt, there’s a good chance it’s had some impact on your credit score.
Proceed with caution when making a balance transfer
Ultimately, Dave Ramsey doesn’t think consumers should take on debt at all. Therefore, his financial advice typically focuses on doing what you can to avoid it.
But if that ship has sailed and you need a way to pay off your debt and keep it manageable, a balance transfer might be a good solution, as long as you recognize your limitations and as long as you find a solution at the same time. plan to release cash for debt payment. That could mean cutting your expenses a lot or taking on a second job to increase your income.
Ultimately, your goal should be to get rid of your debt as quickly as possible. If a balance transfer allows you to do that, then it may not be such a terrible choice.
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