Credit card balance transfers can offer low interest rates, but are they a good idea?

Sure, get yourself a new credit card. Get a lower rate. Feel like you’re doing something positive for your finances.

But don’t delude yourself. Shifting money from card to card is to your finances what aspirin is to treating a bad dose of the “Phuket puke”.

It’s ignoring the underlying problem. It’s short-term relief, not a cure. (And from recent experience in Thailand, useless.)

Your real problem? Living beyond your means. Like my grandma, the credit card junkie, who accepts every free credit card offer a bank is dumb enough to send her, then treats her Golden Oldies girlfriends to a doozie of a night out at the RSL.

There are two types of credit card users – transactors and revolvers.

Transactors pay off their cards in full each month and never pay interest. The banks lose money on them.

Revolvers pay less than the balance each month. They pay interest, which pays for points for the rest of us (thank you!), plus profits for the banks.

That is your nasty little habit that needs to change. Credit card debt is dumb debt.

If you need some help in the meantime, then transferring balances from high-rate cards to low-rate cards can be a short-term solution.

As part of that, there has to be plan to pay off the debt. Throw extra at it each week. Reduce your limit (from $10,000 to $9000 to $8000, etc) as you go.

You will feel better when it’s paid off. As I did when I finally stopped eating dodgy street food in Phuket.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.