Dave Ramsey is not a fan of balance transfers. here’s why

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


Key points

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

There may come a time when you realize you’re juggling several different credit card balances at once. Perhaps you had to fund emergency home repairs. Or maybe you just lost track of your spending, which happens to the best of us.

Either way, if you now have a slew of credit card debt to manage, you might 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-time balance.

It 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. This could give you some breathing room on accrued interest while you work to reduce your debt.

But while a balance transfer might seem like a good solution to your credit card debt problem, financial expert Dave Ramsey thinks otherwise. And you might want to take his advice to heart.

The downside of balance transfers

Why does Dave Ramsey oppose 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’re not getting out of debt — you’re just changing the way your debt is accommodated, 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.” It’s 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 the start, that introductory rate is likely to run out. Once this happens you will often be subject to a variable interest rate which can really climb over time.

Also, balance transfers are usually not free. Credit card companies charge a fee for the option to transfer your debt. And just as Dave Ramsey isn’t a fan of interest, neither is he a fan of fees.

Also, Ramsey warns, if your credit score isn’t already in good enough shape, you might not even qualify for a balance transfer in the first place. And if you have a lot of debt, chances are it’s caused some drop in your credit score.

Proceed with caution when transferring a balance

Ultimately, Dave Ramsey doesn’t think consumers should be in debt. And so his financial advice usually 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 could be a good solution – as long as you recognize its limitations and simultaneously find a plan to release money for debt repayment purposes. This could mean drastically reducing your expenses 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 lets you do that, it might not be such a bad choice.

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