Millions of Americans struggle with the burden of credit card debt. According to the Federal Reserve of New York, total credit card debt in the U.S. has surpassed $1.21 trillion, highlighting a widespread reliance on revolving credit. For many, carrying a balance month-to-month becomes an unfortunate reality, leading to ever-growing interest charges that make it difficult to escape the cycle of debt.

One of the main reasons that credit card debt is so prevalent is the accessibility of credit. It’s very easy to open a credit card account, and as a result, many people rely on them for everyday expenses, emergencies, or large purchases. While credit cards can be useful financial tools when managed correctly, high annual percentage rates and compounding debt often turn them into long-term financial traps.

The impact of high-interest rates on financial health

High-interest credit card debt is difficult to manage—the average interest rate is around 24.2% APR. As interest accumulates, paying off balances becomes more challenging, making it harder to break free from the debt cycle.

Beyond the financial strain, mounting debt can impact your credit score which may limit access to favorable loan terms and contribute to financial stress. The burden of large balances and rising interest payments can create anxiety, making it difficult to focus on long-term financial goals.

The new balance transfer option: a game-changer

Traditional balance transfers and their drawbacks

Balance transfer credit cards have long been marketed as a way to help you escape high-interest credit card debt. These new balance transfer cards often come with a temporary, zero interest APR for a set period of time, allowing consumers to transfer balances from high-interest accounts. However, there are notable drawbacks:

Balance transfer fees: Typically ranging from 3% to 5% of the transferred balance.
Limited promotional period: Once the new card’s introductory rate expires, rates often jump significantly, sometimes even higher than your original rate.
Potential credit score impact: Opening a new credit card results in a hard inquiry on your credit report, which can cause a temporary dip in your score. Additionally, if your credit limit is reduced after a balance transfer, your credit utilization ratio could remain high, limiting potential credit score improvements.
Potential for increased spending: Some consumers use balance transfers as a short-term solution without changing spending habits, which can lead to overspending and further financial strain.

The smartest way to execute a balance transfer

When looking to consolidate credit card debt, two of the most common options are balance transfer credit cards and personal loans. While both can help you reduce interest rates and simplify your payments, it’s important to evaluate their long-term financial impact before making a decision.

Personal loans: a smarter alternative

A personal loan offers a structured, predictable approach to managing debt—one that extends beyond the short-term benefits of a promotional credit card offer. Unlike balance transfer cards that may seem attractive at first but come with hidden costs, a personal loan provides clear advantages:

Fixed interest rates and terms: While balance transfer cards offer an introductory 0% APR, this rate is temporary, and once the promotional period ends, interest rates can skyrocket. A personal loan locks in a low fixed rate for the entire repayment term, giving you cost certainty.
No surprise fees: Many balance transfer credit cards charge a fee of 3% to 5% on the transferred balance. With a personal loan, there are no balance transfer fees, and you know exactly what you owe from day one.
Greater financial flexibility: A personal loan isn't limited to paying off credit card debt. It can also be used to cover upcoming expenses, such as medical bills, home improvements, or life events, offering broader financial support.
Predictable payoff timeline: Unlike credit cards, which allow you to carry a balance indefinitely, a personal loan provides a clear repayment schedule with fixed monthly payments, helping you stay on track toward debt freedom.

Personal loan vs. credit card comparison

Feature	Balance transfer credit card	Personal loan
Interest rates	0% intro APR (limited time), then much higher standard rate	Fixed APR (typically lower than credit cards)
Fees	Transfer fees (usually 3-5%) + potential annual fee	No balance transfer fees
Payoff timeline	Varies; oftentimes increased rates after promotional period	Fixed monthly payments, clear payoff date
Credit score impact	Short-term improvement, long-term risk if balance remains	Potential improvement with responsible, on-time payment
Flexibility	Only covers transferred balance	Can cover multiple expenses beyond just credit card debt

If you're serious about getting out of debt, a personal loan offers a more structured and cost-effective debt management solution compared to balance transfer credit cards. Instead of juggling promotional rates and hidden fees, a personal loan provides stability, transparency, and the opportunity to take control of your financial future.

Do balance transfers hurt your credit score?

Impact on credit score

Balance transfers can affect your credit score in different ways:

Short-term impact: Applying for a new credit card or loan results in a hard inquiry on your credit report, which may cause a small dip in your score.
Long-term benefits: Reducing high-interest debt and making consistent on-time credit card payments can help you significantly improve your credit health over time.

A personal loan can help by lowering your credit utilization ratio—one of the most influential factors in your credit score. By paying off revolving debt, you reduce your utilization and demonstrate financial responsibility to creditors.

Another factor to consider is that sometimes credit card companies will reduce your credit limit after a balance transfer. If this happens, your credit utilization ratio may remain high, limiting the potential credit score benefits that often accompany a balance transfer.

Paying off high-interest credit cards efficiently

Credit card debt can quickly become a bad habit due to high interest rates and compounding balances—just because you can afford to roll over debt doesn’t mean you should. To break free and pay off your balances efficiently, it’s important to explore strategies that minimize interest, consolidate payments, and make your money work for you.

Strategies for debt reduction

There are several ways to manage and pay off high-interest debt, but not all methods are equally beneficial:

Debt consolidation loans: A personal loan, like those offered by BHG, consolidates multiple credit card balances into one predictable payment at a low interest rate.
Home equity line of credit (HELOC): HELOCs may offer lower rates but come with higher risk as they require you to use your home as collateral.
Promotional rate credit cards: Transferring balances to a new card with a promotional 0% APR offer can be tempting, as your credit card payments will be lower initially. However, these rates are temporary, and high fees often apply.

Let’s look at personal loans a little deeper as an example of how this strategy could play out. Switching from a $40,000 credit card balance at 24.74% APR to a personal loan at 12.44% over seven years could save you more than $24,000 in interest.* That’s a substantial financial advantage that not only reduces your debt burden but also provides peace of mind with predictable payments.

While consolidating credit card debt with a personal loan can be a smart debt management strategy, not all debts should be rolled into a loan. Here’s what to consider consolidating:

Credit card debt: This is often the best candidate for consolidation because of its high interest rates, revolving nature, and compounding interest. By replacing multiple credit card balances with a single fixed-rate personal loan, you can reduce interest costs and establish a clear repayment timeline.
Personal and unsecured loans: If you have multiple personal loans with different lenders and high variable rates, consolidating them into a single fixed-rate loan could lower your monthly payments and simplify your finances. You may also benefit from transferring your balances from a short-term loan personal loan to one with extended terms. For example, if your current personal loan is only a three-year term, you may benefit from extended terms that significantly lower your monthly payment by spreading your repayment over a longer period of time.

Think twice about consolidating:

Student loans: Federal student loans come with unique borrower protections, such as income-driven repayment plans, deferment options, and potential loan forgiveness programs. Consolidating them with a personal loan means losing these benefits, making it a less favorable option. However, if you have high-interest private student loans, refinancing with a lower fixed-rate loan might be worth considering.
Auto loans: Car loans generally have lower interest rates compared to credit cards or personal loans. Since they are secured by the vehicle itself, consolidating them into an unsecured loan could lead to a higher interest rate or longer repayment term, making the loan more expensive in the long run.
Medical debt: Some medical providers offer interest-free or low-interest payment plans, so it’s important to compare these terms before consolidating medical bills into a personal loan. If your medical debt has a high interest rate, however, rolling it into a fixed-rate loan may help you pay it off more efficiently.
Mortgage or home equity debt: Using home equity to consolidate credit card debt may offer lower interest rates, but it also means putting your home at risk. Unlike unsecured personal loans, missing payments on a home equity loan or HELOC could result in foreclosure.

By carefully evaluating the type of debt you’re consolidating, you can make an informed decision that maximizes savings while protecting your financial future.

Long-term financial planning

Eliminating high-interest credit card debt is a major financial victory, but staying debt-free is the real challenge. Without a solid long-term financial plan, it’s easy to slip back into old spending habits and accumulate debt again. True financial stability isn’t just about paying off what you owe—it’s about developing and maintaining smart money habits that support lasting success.

A sustainable financial plan requires ongoing discipline, awareness, and adaptability. It means identifying the behaviors that led to debt, creating a safety net for unexpected expenses, and consistently working toward bigger financial goals. Whether your objective is to remain debt-free, build wealth, or invest in future opportunities, long-term planning is essential for maintaining financial security and peace of mind.

By implementing smart financial habits, you can take control of your personal finances and avoid falling back into debt. Consider these key strategies:

Identify spending habits that contribute to debt accumulation and make necessary adjustments.
Regularly assess and adjust financial goals to stay on track and prevent slipping back into high-interest debt.
Leverage tools like autopay so that you won’t miss regular payments.
Build an emergency fund to cover unexpected expenses and reduce reliance on credit cards during financial setbacks.
Invest in financial education to improve money management skills and make informed financial decisions.
Monitor your credit with the major credit bureaus and keep track of your FICO score.

With the right approach, you can break the cycle of debt and build a strong financial foundation for the future.

Making informed financial decisions

Reaping the benefits of a non-traditional balance transfer

Choosing a personal loan instead of a traditional balance transfer credit card can offer significant financial advantages:

Lower interest charges, meaning more savings over time.
Lower monthly payments and fewer due dates to manage, allowing better cash flow management.
A structured payoff plan, which can help you eliminate uncertainty and prevent prolonged debt cycles.

Staying committed to financial growth

Achieving financial health requires ongoing effort. Continually reassess your finances, explore ways to optimize debt repayment, and commit to sound financial habits. Small, strategic moves today can lead to lasting financial stability.

How BHG can help with balance transfers

At BHG Financial, we believe financing should fit seamlessly into your life and goals. That’s why we offer personal loans tailored to your needs, with amounts up to $250,000¹ and flexible terms of up to 10 years.^1,2 Consolidate your high-interest debt with a BHG loan designed to help you move forward confidently.

Plus, you’ll enjoy dedicated, U.S.-based concierge service that works around your schedule—because your time is valuable. Ready to see what’s possible? See your personalized offers in just seconds.

* The savings estimate assumes a fixed-monthly payment of $716 is made on the personal loan and a monthly payment of $1,006 is made on the variable APR credit card and no additional draws on the line are made for the 7-year period.

Not all solutions, loan amounts, rates or terms are available in all states.

¹ Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.

² Personal Loan Repayment Example: A $59,755 personal loan with a 7-year term and an APR of 17.2% would require 84 monthly payments of $1,228.

Annual percentage rates (APRs) for BHG Financial personal loans range from 8.72% to 27.87%, with terms from 3 to 10 years.

No application fees, commitment, or impact on personal credit to estimate your payment.

Consumer loans funded by Pinnacle Bank, a Tennessee bank, or County Bank. Equal Housing Lenders.

For California Residents: BHG Financial loans made or arranged pursuant to a California Financing Law license - Number 603G493.

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