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What Is a Credit Card Balance Transfer?

For most people, a relationship with credit cards begins as a way to build credit or to have in case of emergencies. But what starts out as a “harmless” idea lands most people stuck in a cycle of debt.

And when you’re up to your eyeballs in credit card debt, it’s hard to see a way out. That’s why many folks try to look for quick fixes that help until the next paycheck arrives. One simple Google search for “What is a credit card balance transfer?” will show you that this kind of debt only keeps you in debt. But here’s the problem: Most “help” will only lead you further into debt.

What Is a Credit Card Balance Transfer?

A credit card balance transfer is when you take the debt balance from one credit card with a high interest rate and transfer it to another credit card with a lower interest rate. People who are struggling with credit card debt use this method of credit transfer as a way to save money on the amount of interest they’re paying each month.

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A quick internet search on credit balance transfers will tell you that it’s a great idea—especially if you transfer your debt to a new card with 0% APR (annual percentage rate). And on the surface, it’s a way to help you free up more of your paycheck right now. But here’s what you need to know: It’s a bad idea. 

Why Is It a Bad Idea?

“You really didn’t do anything. You just moved the money around a little bit, and you saved a little bit of interest. But it’s a tiny, tiny amount of money that you’re actually saving because you think about how fast you’re going to pay that thing off, and if you pay it off in six months, it’s only half of a year’s worth of interest. And when you add that up on that credit card, it’s really not that much money. If you were going to keep the debt for 30 years, it becomes a big deal. Interest rate’s a big problem then.” — Dave Ramsey

If you’re interested in a credit card balance transfer, we’re not trying to make you feel bad. We just want to arm you with the honest truth: It’s a bad idea. Here’s why.

Credit card companies have one goal and one goal only: to keep you in the cycle of debt. That’s probably giving them a little too much credit. They’re actually not thinking about you at all, because when they see you, they see dollar signs.

Have you ever wondered why you get rewards for using their money instead of your own? Yup—you guessed it . . . so they can keep making money off of you. Plus, if you’re the forgetful type (and most of us are), they’ll make even more money off your missed payments with interest rates, late fees and more.

Being overwhelmed with debt while living paycheck to paycheck is scary. Not only are you trying to figure out how to keep a roof over your head or how to fix that busted transmission on your car, but you’re trying to juggle what little money you have left over to keep your credit card company happy. Believe us, transferring debt from one credit card to another won’t fix the problem. At best, it’s a temporary solution. And at worst, it just keeps you in debt for even longer because you don’t have a high interest rate keeping you up at night.

Listen: There’s another way. You don’t have to stay in the cycle of debt with another credit card balance transfer.

Alternatives to Credit Card Balance Transfer

Take it from us . . . there are plenty of other ways to free up your paycheck than a credit card balance transfer. Here are just a few:

1. Get serious about paying off debt.

Debt is serious business, so it’s time to get serious about paying it off. The only way to free up your money is by getting rid of the very thing that’s holding it hostage. So if you want to start keeping more of your hard-earned dollars each month, you’ve got to get in the right mindset to get rid of it once and for all.

2. Stop borrowing money.

This is unpopular advice, but the only way you’re going to get rid of your debt is by stopping the cycle of borrowing. If you’re not using your credit card, you’re not adding to your balance. That means you’ve got to start living within your means. So if you can’t afford it, you can’t have it. And when it comes to your kids, “no” is a complete sentence.

3. Follow the Baby Steps.

The Baby Steps have helped millions of families get out of debt, save for emergencies, and build wealth. When you decide you’ve had it once and for all with borrowing money, you’ll want to use the Baby Steps to help you take control of your money and change your life for the better. Believe us—it works. Learn more about the 7 Baby Steps here.

4. Use the debt snowball method.

The debt snowball method is the best way to pay off debt. It’s worked for millions of families all across America, and if you’re serious about it, it can work for you too. The debt snowball is the tool that helps families get through Baby Step 2: paying off all debt (except the house). What you’ll do is list your debts from smallest to largest, no matter the interest rate. Pay minimum payments on everything but the smallest. Remember all that stuff you sold? Use the money you made (and any other money you can squeeze from the budget) to throw at the debt. Once it’s paid off, you’ll take the minimum payment from that debt and add it to the next smallest debt. Keep going and you’ll be amazed how quickly you can get out of debt with that giant snowball.

As the saying goes, there are many ways to skin a cat. (We’ve never skinned a cat, so we’ll take their word for it.) But when it comes to paying off debt, there’s only one way: to just get out of debt. You’ve got to make the decision that you’ve had enough of living paycheck to paycheck and sending this month’s hard-earned money to that steak dinner you put on the credit card last month. A credit card balance transfer will only help you prolong the length of time you’re in debt. It’s time to really decide that you’re done borrowing money. Follow the Baby Steps, use the debt snowball, and get out of debt once and for all.

You didn’t think we’d share all of that and leave you to figure it out for yourself, did you? Don’t worry, we’re going to be with you every single step of the way. Check out Ramsey+. Think about it as your financial guide giving you small steps that lead to big wins with your money. Ramsey+ is your all-access membership to budgeting with EveryDollar and tracking your progress with our new Baby Steps app. No matter where you’re starting, we’ll be by your side every step of the way.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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