Dave Ramsey Is Not a Fan of Balance Transfers. Here's Why

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  • A balance transfer can be a good way to consolidate credit card debt.
  • Dave Ramsey considers balance transfers to just be a way to move your debt around.

Are balance transfers a good solution to debt? Maybe not.

There may come a point when you find that you're juggling a few different credit card balances at once. Maybe you ran into some emergency home repairs you had to finance. Or maybe you simply lost track of your spending, which happens to the best of us.

In either event, if you now have a string of credit card debts to manage, you may be considering a balance transfer. With a balance transfer, you move your existing balances over to a new credit card so you can focus on paying down that single balance.

Doing so can make 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 a bit of a reprieve on interest accrual as you work on whittling down your debt.

But while a balance transfer might seem like a good solution to your credit card debt problem, financial expert Dave Ramsey thinks the opposite. And you 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 thinks consumers should avoid it at all costs. When you do a balance transfer, you don't get out of debt -- you simply change the way your 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's a cycle that can be very difficult to bust out of.

Furthermore, while it's common for balance transfer offers to give you a 0% interest rate on your debt at first, eventually, that introductory rate is apt to run out. Once that happens, you'll often be subject to a variable interest rate that can really climb over time.

Also, balance transfers generally aren't free. Credit card companies charge fees for the option to move your debt over. And just as Dave Ramsey isn't a fan of interest, he's also not a fan of fees.

Besides, Ramsey warns, if your credit score isn't already in pretty good shape, 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 caused some degree of a credit score hit.

Proceed with caution when doing a balance transfer

Ultimately, Dave Ramsey doesn't think consumers should be in debt at all. And so his financial advice commonly centers on doing what you can to avoid it.

But if that ship has sailed, and you need a way to pay down your debt and keep it manageable, a balance transfer could be a good solution -- as long as you recognize its limitations, and as long as you simultaneously come up with a plan to free up cash for debt payoff purposes. That could mean slashing your spending to a large degree or taking on a second job to boost your income.

Ultimately, your goal should be to shed 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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