Balance transfer denied? what to do now

A balance transfer can be the shortest route to faster debt repayment if it means paying a lower interest rate. If you have applied for a balance transfer card to pay off a debt and are denied, this can be a real blow.

Getting approval for a balance transfer card is not always a lock. Find out why your balance transfer application may be rejected and what you can do to increase your chances of being approved.

Why are balance transfers prohibited?

As a rule, there are two scenarios that can lead to the refusal of a balance transfer:

• Your application has been rejected by the card issuer.
• Your application has been approved, but when you try to transfer your balance to a new card, the transfer is rejected.

Here’s a closer look at some of the specific reasons why a balance transfer is denied.

Applying for a balance transfer card with the same card issuer

Trying to transfer a balance between two cards from the same bank can be an obstacle to achieving your balance transfer goals.

Most card issuers do not allow balance transfers between the two cards they issue. This is because credit card companies rely on balance transfers to make money through fees and interest. There is little financial incentive for the card issuer to transfer the balance between two of their own cards if you are likely to pay off the balance before the end of the promotional period.

“While this may seem like a way to make things easier by staying at a reputable institution, it’s actually just a guaranteed way to get your application rejected,” says Tina Hay, founder and CEO of Napkin Finance.

Having a low credit score

A low credit score may prevent you from getting approved, even if you have been pre-screened for a balance transfer offer.

While there are some balance transfer offers aimed at people with fair or average credit, most promotions are for people with scores ranging from good to excellent. As a general rule, issuers like to offer balance transfer promotions to customers who they believe will not pay off their balance.

For example, the Citi Rewards+® card offers a 0% initial APR on balance transfers for 15 months from the date of your first transfer (then variable APR from 17.74% to 27.74% thereafter), but you will need a good credit history. get qualified.

By comparison, you can get approved to transfer your balance using a Discover it® secure credit card with a bad to fair credit history. This card does not offer a 0 percent APR balance transfer, but you can receive an initial annual interest rate of 10.99 percent for six months from the date of the first transfer (then you will pay a variable annual interest rate of 26.74 percent) .

Hay offers a good rule of thumb: “The better your credit history, the more likely you are to be approved and approved on better terms.”

She says the same things that can hurt your chances of being approved for other loans or lines of credit also apply to balance transfers. This includes late or missed payments and bills that are close to their limit or are depleted.

Having a thin credit file can also be problematic. Credit card companies may not want to approve a balance transfer if you have only used the loan for a short time or if you only have one or two active credit accounts.

Requesting too many balance transfers in a row

Too many balance transfer cards or balance transfer requests in quick succession can also block your path to approval. First, multiple card applications that require complex requests will affect your credit score.

Too many applications and shuffling your balances will signal to credit card companies that you are in some kind of financial difficulty and make them less interested in letting you transfer your balances in case your account becomes overdue.

Exceeding the credit limit

You may be approved by a credit card to transfer the balance, but you will be told later that your transfer request failed.

You may be denied a balance transfer because you have requested more than your credit card company allows. Banks may also limit balance transfer requests to a set dollar amount or a percentage of your new line of credit. For example, Chase limits all balance transfers made online or through a customer service representative to $15,000 within a 30-day period.

Before requesting a balance transfer, it is helpful to know what your credit limit and balance transfer limits will be on the new card. Thus, you can request the transfer amount, which is most likely to be approved.

Note. The balance transfer fee (usually 3 to 5 percent of the transfer amount) is credited against your transferable balance, reducing your “true” limit.

What to do if you are refused a balance transfer

Denying a balance transfer card can be inconvenient, but you can make things right by taking the right steps.

First, you can ask the credit card company to reconsider your decision. Whether or not you get the green light depends a lot on why you were denied in the first place.

If you plan to ask your credit card company to reconsider your balance transfer request, be prepared to apply for approval. For example, if you have a good credit score or a low debt-to-income ratio, these things can work in your favor.

If the refusal is related to bad credit history or low income

You may be able to get a cancellation if you offer extenuating circumstances to explain the negative marks on your credit report.

The same applies if your request was denied due to low income, but you have other sources of money that you did not list on your original application. Other eligible sources of income that you may list to apply for a card include your spouse’s income, grants, scholarships, investment income, alimony, and unemployment benefits.

If your request was denied due to lack of available credit

One thing you can do is resubmit your original request using a smaller dollar amount. You will then need to decide whether to pay off the balance on the first card or apply for a second balance transfer card elsewhere.

When deciding what to do with the remaining balance, which is likely to accrue interest throughout the day, you should also consider whether you can pay off the newly transferred balance on the new balance transfer card before the end of the initial period.

If you applied for too many consecutive balance transfers

As mentioned earlier, sometimes balance transfers are rejected because the cardholder has requested too much at one time. How much is too much? This is difficult to determine and is likely to be determined on a case-by-case basis. For the most part, transferring multiple balances to a single balance transfer card is allowed as long as the total amount is less than the card’s credit limit.

However, if your total card debt is too high for one card and you have tried to apply for another balance transfer card, you may run into some problems. As a general rule, you should try to limit card applications to once every six months.

How to increase the chances of a balance transfer being approved

If you are interested in transferring the balance, you will need good credit to do so as offers have become more competitive.

These tips can help you prepare for applying for a balance transfer card.

• Correct errors in credit reporting. Credit report errors are not uncommon, and they can damage your credit history. If you notice a mistake in yours, file a claim with the three main credit bureaus – Equifax, Experian and TransUnion.
• Know the Issuer. If you have a balance transfer card or two, check your card issuer’s transfer policy. You don’t want to waste time (or risk your potential credit score) applying for a balance transfer if it could be rejected because you already have a card with that bank or because the amount you want to transfer is larger than the credit card company allows.
• Check your credit limit. Make sure you have enough space on your card to transfer the balance. And be sure to consider the balance transfer fee and how it is included in the transfer limit when thinking about the transfer amount.
• Improve your credit with existing credit scores. If your score is not quite what it needs to be in order to be approved for a balance transfer, work on doing what you can to improve your credit score. Make at least the minimum payments (or more if possible) on time and focus on paying off some of your credit card debt to reduce your credit usage.
• Think carefully about how additional applications will affect your credit. If you apply for too many credit cards in a short period of time, you can damage your account with multiple complex requests. And a flurry of card applications can send a signal to potential lenders that you’re too dependent on credit.

Weigh the Alternatives to a Balance Transfer

A balance transfer offer is a great way to consolidate your debts, especially if they charge interest on different cards. However, this is not the only way to pay off debt. There are several options you can explore after your transfer request is denied.

For some cardholders, simply asking for a lower interest rate can provide much-needed relief. You’ll need a pretty good reason, like being a longtime customer of your card issuer or using another low interest offer you got from another issuer.

Another possibility is a debt consolidation loan. This type of loan allows you to combine all your debt into one and the lender will provide you with funds to pay off various debts, including credit card debt. You will then work towards paying off the debt to the creditor every month, often at a lower interest rate (although this is not guaranteed). This method makes paying off your debt easier because you make one payment instead of several, and a debt consolidation loan can save you money on interest.

A debt management program is another alternative, usually arranged by credit counseling agencies. As with a debt consolidation loan, you make a single payment to an agency that, in exchange, will manage your debts and distribute your payments for you. However, with DMP, you will have to close your accounts first and then focus on paying off 100 percent of your debt.

bottom line

Balance transfers can save money on interest, but can be difficult to complete successfully if you have a lower credit score or your approved credit limit is lower than expected.

When applying for balance transfer offers, consider your budget and the amount you will be able to pay each month. This can help ensure that you don’t have any left over after the introductory bet period ends.