What to do when your balance transfer is denied

A balance transfer can be a shortcut to getting out of debt faster if it means paying a lower interest rate. If you’ve applied for a balance transfer card to pay down debt and been denied, it can be a real blow.

Getting approved for a balance transfer card isn’t always a lock. Learn why your balance transfer application may be denied and what you can do to increase your approval chances.

Why are balance transfers denied?

Generally, there are two scenarios that can cause a balance transfer denial:

• Your application is turned down by the card issuer.
• Your application is approved, but when you try to transfer a balance to the new card, the transfer is declined.

Here’s a closer look at some specific reasons why balance transfers get denied.

Applying for a balance transfer card with the same card issuer

Trying to transfer balances between two cards from the same bank could be a roadblock to your balance transfer goals.

Most card issuers won’t allow a balance transfer between two cards that they issue. That’s because credit card companies rely on balance transfers to make money through fees and interest charges. There’s little financial incentive for a card issuer to transfer balances between two of its own cards if you’re likely to pay the balance off before the promotional period expires.

“While this might seem like a way of simplifying the task by staying with an institution you know, it’s actually just a guaranteed way of getting your application rejected,” says Tina Hay, founder and CEO of Napkin Finance.

Having a low credit score

A low credit score could keep you from making the approval cut, even if you were prescreened for a balance transfer offer.

While there are some balance transfer offers geared toward people with fair or average credit, most promotions are designed for people with scores in the good to excellent range. Generally, issuers like to offer balance transfer promotions to customers they don’t think will default on their balance.

For example, the Citi Rewards+® Card offers a 0 percent introductory APR on balance transfers for 15 months from the date of your first transfer (then a variable APR of 18.49 percent to 28.49 percent after that) but you’ll need good to excellent credit to qualify.

By comparison, it’s possible to get approved for a balance transfer with the Discover it® Secured Credit Card with bad to fair credit. This card doesn’t offer a 0 percent APR balance transfer, but you can get an introductory APR of 10.99 percent for six months from the date of first transfer (then you’ll pay a variable APR of 27.99 percent).

Hay offers a good rule of thumb to follow: “The better your credit, the more likely it is that you’ll be approved, and be approved for better terms.”

She says the same things that can reduce your chances of approval for other loans or lines of credit also apply to balance transfers. That includes late or missed payments and accounts that are close to their limit or maxed out.

Having a thin credit file could also be problematic. Credit card companies may not be willing to approve a balance transfer if you’ve only been using credit a short time or have just 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 could also block your way to approval. For one, the multiple card applications, which require hard inquiries, will ding your credit score.

Too many applications and shuffling of your balances signal to credit card companies that you’re in some kind of financial distress and will make them less keen to allow you to transfer your balances, in case your account becomes delinquent.

Exceeding your credit limit

You might be approved for a balance transfer credit card, only to be told later that your transfer request didn’t go through.

It’s possible to see your balance transfer denied because you requested a larger amount than your credit card company allows. Banks can also limit balance transfer requests to a set dollar amount or percentage of your new credit line. 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’s helpful to ask what your credit limit and balance transfer limits will be on the new card. This way, you can request a transfer amount that’s likely to be approved.

Note: The balance transfer fee (usually a 3 percent to 5 percent fee on the amount you transfer) is counted toward your transferable balance, reducing your “true” limit.

What to do when your balance transfer is denied

Getting denied for a balance transfer card may be inconvenient, but you can recover by taking the right steps.

First, you can ask the credit card company to reconsider. Whether you get the green light depends largely on why you were denied initially.

If you’re planning to ask the credit card company to give your balance transfer request a second look, be prepared to make a case for approval. For example, if you have a strong credit score or a low debt-to-income ratio, those things might work in your favor.

If a denial is due to poor credit or low income

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

The same goes if your request was denied because of low income, but you have other sources of money that you didn’t report on your initial application. Other acceptable sources of income you can put for a card application include your spouse’s income, grants, scholarships, investment returns, child support and unemployment benefits.

If your request was denied due to a lack of available credit

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

When deciding what to do with your remaining balance, which is likely incurring interest by the day, you should also think about whether you can pay off your newly transferred balance on your new balance transfer card before the intro period ends.

If you’ve applied for too many consecutive balance transfers

As previously mentioned, sometimes balance transfers are rejected because a cardholder has requested too many at once. How many is too many? That is difficult to define and likely determined on a case-by-case basis. For the most part, transferring multiple balances to a single balance transfer card is permitted, as long as the total amount is below the card’s credit limit.

However, if your total card debt is too great for one card, and you were trying to apply for another balance transfer card, you may run into some trouble. As a general rule, you should try to limit your card applications to one every six months.

How to increase your balance transfer approval odds

If you’re interested in getting a balance transfer, you’ll need good credit to do it, as offers have become more competitive.

These tips can help as you prepare to apply for a balance transfer card.

• Fix credit reporting errors. Credit report errors are not uncommon, and they can damage your credit. If you spot a mistake on yours, file disputes with the three major credit bureaus — Equifax, Experian and TransUnion.
• Know the issuer. If you have a card or two in mind for a balance transfer, scout out the card issuer’s transfer policies. You don’t want to waste time (or risk a potential credit score ding) applying for a balance transfer if it’s likely to be denied because you already have a card with that bank or because the amount you want to transfer is more than the credit card company allows.
• Review your credit limit. Make sure your card has enough room to accommodate a balance transfer. And be sure to factor in your balance transfer fee and how it’s included in your transfer limit, when thinking about how much to transfer.
• Improve your credit through your existing credit accounts. If your score isn’t quite what it needs to be to get 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 down some of your credit card debt to lower your credit utilization.
• Carefully consider how additional applications will affect your credit. If you apply for too many credit cards within a short time frame, you could damage your score via multiple hard inquiries. And a flurry of card applications could send a signal to prospective lenders that you’re too reliant on credit.

Weigh alternatives to balance transfers

A balance transfer offer is a great way to consolidate your debts, especially if they’re all accruing interest on different cards. However, it’s not the only method to deal with your debt. There are a few options you can explore after your transfer request is denied.

For some cardholders, simply asking for a lower interest rate could offer some much-need relief. You’ll need a pretty strong case, such as being a long-time customer of your card issuer or leveraging another low-interest offer you got from a different issuer.

Another possibility is a debt consolidation loan. This type of loan allows you to wrap up all of your debt into one, and the lender will give you funds to pay off your various debts, including credit card debt. Then, you’ll work on paying back your lender each month, oftentimes at a lower interest rate (though this is not guaranteed). This method makes it easier to pay off your debt, since you’re making one payment instead of several, and the debt consolidation loan may save you money on interest.

A debt management program is another alternative, usually arranged by credit counseling agencies. Much like a debt consolidation loan, you’d make one payment to the agency, which would in exchange manage your debts and distribute your payments for you. However, with a DMP you’d have to close your accounts first, then focus on paying off 100 percent of your debt.

Bottom line

Balance transfers can save money on interest charges, but performing one successfully can be tricky 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 how much you’ll be able to pay each month. This can help ensure that you’re not left with a remaining balance once the introductory rate period ends.