Credit Card Consolidation & 0% Balance Transfers | Does It Really Help?

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On a recent post telling how to deal with credit card debt problems, I shared some advice and resources for getting out of debt.  In that same post, Darren (from More Than Finances) asked what I thought about 0% credit card transfers.  I gave a quick answer and thought I’d deal with it in more detail today.

From a purely mathematical standpoint, there is no denying that taking advantage of 0% balance transfers or credit card consolidation into a lower interest makes sense. But, those who argue against these tricks do so from the perspective of psychology.

Common Arguments Against Credit Card Consolidation & 0% Balance Transfers

1.  They detract your focus and they ease the pain of debt.

There are some people who spend their energy shuffling, reorganizing, and re-categorizing debt, and somehow they feel like they are making progress.  However, in the end they have done little except delay the inevitable.  The payments are is still there.

They get a 0% credit card balance transfer not to help them get out of debt, but to continue to owe money.  They use such mechanisms or hacks to beat the system.  Unfortunately, the only result is a deeper pile of debt.

When it comes to paying off credit card debt, (or any debt) there is no fancy footwork that will solve the problem.  The problem can only be solved by your intensity and your willingness to put more and more money towards the principle of the debt.

Dave Ramsey reports, “A friend of mine works for a debt-consolidation firm whose internal statistics estimate that 78 percent of the time, after someone consolidates his credit-card debt, the debt grows back.  Why? He still doesn’t have a game plan to either pay cash or not buy at all …” (Total Money Makeover, 48).

In other words, if you want a debt-consolidation to work or a balance transfer, you need to be rare.  You need to so something that only 22% of people do – take a baby step forward on getting out of debt and keep on going.  But, just because only 22% of people can do it, doesn’t mean you can’t be one of those people.

2.  Misuse of time and creative energy

In addition, it is possible that you can spend a substantial amount of time looking for the next offer that your time would have been better spent getting a part-time job and setting up a budget.

Some people literally spend hours scouring the web looking for the lowest credit card interest rates or 0% balance transfer opportunities.  If those hours could be spent working, it is likely the person would be making more debt repayment progress.

3.  Near addictive dependence on others

You check the mail – no credit card offers.  You look online, no lower interest rates.  You spend all of your emotional effort and time depending on someone to offer a bonus that will help ease the burden of your credit card debt.  However, you would be better off focusing on the factors you can control (income and spending) instead of waiting for a company to come and ‘save’ the day.

A Viable Way To Use Credit Card Debt Consolidation and Balance Transfers to Help You Get Out of Debt

However, it seems as though a person who finally gets it would be able to find a small victory through either/both a debt-consolidation and balance transfer.  If there is a system in place to help serve your cause, then by all means, take advantage of it.  If you really hate paying interest, you’ll naturally be drawn to these options.

If I ask you what is your game plane and you say, “Debt consolidation or balance transfer”, then I know that you will not get out of debt.  That is not a game plan.  It may be a part.  It may be a component.  But, it is not a game plan.  You are still relying on some type of a maneuver to get you of of debt, and it simply will not happen.

However, if I ask you what is your game plan and you say, “I’ll cut spending — make extra principle payments — get a second job — sell the car — and consider a debt consolidation or balance transfer”, then I think you’re on the right track.  It is part of an actual plan.

You’re Ready To Consider Credit Consolidation or Balance Transfer When …

1.  You have addressed the causes of your debt.

Larry Burkett says this, “The symptom is that you have a lot of high-interest debt, but that’s not the problem.  The problem is that you’re spending money you don’t have, buying things that you can’t afford, and not paying your bills on time.”

2.  You’ve charted out a game plan for paying off all the money you owe.

You have charted out your repayment plan.  You have made an agreement to cut out some of your spending.  You are determined to pay off everything you owe.  In fact, you are so sick of your debt that you want to do it as quickly as possible with as little interest as possible.

If you read how to get out of credit card debt or how to deal with debt problems and it seems like too much work, save yourself the effort of a consolidation or balance transfer.

2.  You’ve changed.

You haven’t just talked about how you will change.  You haven’t imagined what a new disciplined self would look like, but you’re actually doing it.  You’re making hard decisions and doing what is necessary to get out of debt.

Credit Card 0% Balance Transfer: Put to the Test

Imagine you have $10,000 in credit card debt and your interest rate is 14.43% (the national average).  You’re serious about getting out of debt so you plan to pay the required monthly payment of $175 per month, plus an extra $275.  It will take you four years to pay off your credit card debt (assuming you don’t take on any new debt).

However, you just found out that you are eligible to transfer that money to a 0% 6 month introductory interest rate.  After that six months, your rate goes back up to 14.43%.  You decide to transfer your balance.

Over that 6 month period, you would save $688.55 in interest (see this calculator and this repayment calculator).

During that 6 months when you had a 0% rate, you still continued to pay $450 per month.  At the end of the six months, your principle will be reduced to $7,300.  From there, you keep making your $450 payment when the rate goes back to 14.43% and you will pay off your debt in 33 months.  This means you get to be out of credit card debt a full 15 months sooner.

Wow, that’s cool.

Credit Card Consolidation: Put to the Test

Imagine you have $10,000 in credit card debt and your interest rate is 14.43%.  Over a five year period, that is $1,704.83 in interest.

However, if you consolidated your debt at 10%, you would pay $1,105.32 in that same time period.  That is almost a $600 savings.  In addition, more of your payment would actually go to principle and you would also pay off your debt faster.

Lending Club as a Credit Card Consolidation Option

Last month I introduced the value of Lending Club for investors.  Lending Club allows you to lend your money to interest borrowers.  However, Lending Club also has a feature for those who are looking to consolidate debts or refinance credit cards.  The rate you can secure will depend on your credit score. You can find out the available rate after completing a short application online.  Rates start at 7.93% and increase based on your credit score.  With a good credit score, you should expect to find something around 10% for credit card consolidation.

I like that Lending Club cuts out the middle man (the bank). As such, you can typically find better rates by using Lending Club.

Advantages of Lending Club

  • Fixed interest rate
  • No prepayment fee
  • Minimal fees
  • Easy online application process

Visit Lending Club to see if their consolidation is right for you.  But, remember if this is your only game plan, it won’t work.  Get your debt repayment plan in place, and then add Lending Club to the mix to give you an extra advantage.

Get a Personal Loan Today!


  1. says

    Hey Craig,

    First, thanks for the mention. I appreciate it!

    Secondly, I agree that the balance transfers work best when you’re committed to getting rid of all your credit card debt. If you don’t pay off the balance within the promo period or find another 0% balance transfer offer, then as you mentioned, you’re just shuffling around debt and going for a band-aid fix.

    These offers usually get thrown at people who have good credit. Ironically, they’re the people who are most likely not in need to use the balance transfer.

  2. says


    I think that the 0 % balance transfers will help consumers, given they create a strategic battle plan if you will to pay off the debt in full, before that introductory rate expires. Many consumers will often just transfer the debt, and pay the minimums. DO NOT do this. If you have $10,000 transferred on a 0% and have 10 months until it expires, please pay $1,000/mo.

    • says

      I do think that when coupled with a strategic plan they can be beneficial. The issue is that most people do this as a solution not as part of a larger debt reduction plan.

    • says

      There are really two apcoparhes to this. It depends on what your goal is.If your goal is to see an immediate improvement in your credit scores, then you should pay on the cards that are closest to their limit. This will lower your utilization percentage, which should boost your score.If your goal is to pay off your debt faster then you should put the money towards the account with the highest interest first. Then once that one is paid off, snowball it by applying the freed up monthly payment towards the card with the next highest interest, etc.

  3. says

    I agree with Craig, I think that if done correctly they can be beneficial. Just make sure you stick to the debt at hand and try extremely hard to pay it off.

  4. says

    I think its good when people try and consolidate their own debt. It is very hard to do this though and its usually a good idea to get rid of the cards you have once you’ve done this. The reason I say this is because many people will continue to use the available credit of the credit card that they have in their position. So get rid of the cards given you consolidate all the debt into a balance transfer card.

    • says

      Glass-Steagall isn’t really about the bgduet/national debt at all. It’s about regulation of the banks by the Fed. During Alan Greenspan’s time as Chairman of the Fed, rapid deregulation of banks was started, allowing banks to buy risky CDOs (bundles of loans). Ratings agencies and insurance companies (AIG) were also in on this. The end result? Housing and banking crises, leading to the billion dollar bailout. Iceland followed a similar path with their banks (deregulation), and now they owe millions of dollars to foreign countries because of the risky loans their own banks made and lost money on. Out of all the countries that have deregulated banks, Iceland is probably the one hit hardest (mainly because it has a small economy to begin with)

    • says

      5. Centralization of credit in the hands of the state, by means of a natnoial bank with State capital and an exclusive monopoly. Americans call it the Federal Reserve which is a privately-owned credit/debt system allowed by the Federal Reserve act of 1913. All local banks are members of the Fed system, and are regulated by the Federal Deposit Insurance Corporation (FDIC) another privately-owned corporation. The Federal Reserve Banks issue Fiat Paper Money and practice economically destructive fractional reserve banking.Herman Cain the communist apologist.Communist plank number 5 look it up.

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