A balance transfer card can be a shortcut to getting out of debt faster if it means paying a lower interest rate.
While many card issuers have pulled back on balance transfer offers, largely due to financial uncertainty surrounding the COVID-19 pandemic, there are still 0% APR deals to be found.
“Balance transfers are tools,” says Howard Dvorkin, personal finance expert and Debt.com chairman.
Dvorkin says in the best-case scenario, you execute a 0% APR transfer and pay the balance down before the promotion expires.
Getting approved for a balance transfer card isn’t always a lock, however. Learn why your balance transfer application may be denied and what you can do to increase your approval chances.
See related: 9 things you should know about balance transfers
Why are balance transfers denied?
Generally, there are two scenarios that can keep you from executing a balance transfer successfully:
- Your application for a balance transfer card is turned down by the card issuer.
- Your application for a balance transfer card is approved, but when you try to transfer a balance to the new card, the transfer is declined, or the credit limit you were approved for is insufficient to cover the amount you want to transfer.
Here’s a closer look at some specific reasons for a balance transfer denial.
1. 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,” says Marshall Armond, CEO of consumer credit education site CreditRevo.
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 allow you to transfer balances between 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.
2. Having a low credit score
A too-low credit score could keep you from making the approval cut, even if you were prescreened for a balance transfer offer.
Armond says that 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, they like to offer balance transfer promotions to customers they don’t think will default on their balance,” says Armond.
Applying for balance transfer requests too frequently could also block your way to approval if multiple hard inquiries ding your credit score.
Every balance transfer credit card is different regarding the minimum score it requires for approval.
For example, the Citi Rewards+ Card offers a 0% introductory APR on balance transfers for 15 months from the date of your first transfer (then a variable APR of 13.49% to 23.49% after that) but you’ll need excellent credit to qualify for the card.
By comparison, it’s possible to get approved for a balance transfer with the Discover it® Secured card with bad to fair credit. This card doesn’t offer a 0% APR balance transfer, but you can get an introductory APR of 10.99% for six months if your transfer posts to your account by July 10, 2021. (After the introductory period, there’s a variable APR of 22.99%.)
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 dim 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.
3. Balance transfer requests that exceed 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.
Not having enough available credit to complete the transfer could be the reason, says Armond.
It’s possible to be denied if you’re requesting a balance transfer for a larger amount than your credit card company allows.
Banks can limit balance transfer requests to a set dollar amount or percentage of your new credit line. USAA, for example, caps balance transfers at 95% of the balance transfer card’s credit limit.
Before requesting a balance transfer, it’s helpful to ask what your credit limit and balance transfer limits will be with the new card. This way, you can request a transfer amount that’s likely to be approved.
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 could ask the credit card company to reconsider. Whether you get the green light depends largely on why you were denied to begin with.
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 succeed in getting 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 income that weren’t reported on your initial application.
If your request was denied due to a lack of available credit
Armond says you can 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.
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.
- Toe the line with 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 it. “Make at least the minimum payments on time,” says Dvorkin, and focus on paying down some of your credit card debt to improve 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.
Balance transfers can save money on interest charges, but getting approved for one 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.