A rotating system consisting of a slender massless viscoelastic shaft simply supported in rolling bearings and a rigid massive disc mounted to the overhung end of the shaft is considered to study its stabilization against flutter. Instability and transverse vibration occurs due to the internal friction in the shaft. It is shown in the paper that the disc can be stabilized and its bifurcating self-excited vibration can be effectively reduced and modified by contactless radial magnetic actuators, using two alternative control strategies – semi-active utilizing constant or rotation-dependent actuator voltage or fully active with closed-loop state-dependent feedback. The near-critical transverse disc vibration is analyzed using the theory of Hopf bifurcation. Smooth, soft-type self-excitation is presented after activation of the dynamic vibration control which prevents the system from sudden jumps of vibration amplitude near the critical point.