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Most of the time when you pull out a credit card, it's just to make a payment. But what if you could get other benefits too?
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When you apply for a balance transfer credit card, both the credit limit and the amount of debt you want to move are subject to approval. In some cases, you could be approved for a balance transfer credit card with a credit limit that is less than the debt you wanted to transfer onto it. While you could still move a portion of the existing debt to the new card, the leftover debt will remain in your old account and continue to collect interest.
There are three main options you can consider if your balance transfer debt is more than the credit limit you're approved for on a new card:
So before you apply for a balance transfer credit card, it’s a good idea to think about what factors could lead to only part of your balance transfer being approved – as well as what to do if that happens.
Here are some of the reasons why you may be unable to transfer your entire debt to a new balance transfer credit card.
While some cards accept balance transfer debts that equal up to your approved maximum credit limit, others may not. For example, the card may have a maximum balance transfer limit of 70%, 80% or 90%. If you were approved for a $10,000 credit limit and the card had a 90% balance transfer limit, you can transfer a debt sized up to $9,000. Before you apply for a new credit card, check if there is a balance transfer limit and if this supports the debt you plan to move based on your requested credit limit. Check out our guide to balance transfer limits to compare how much you can usually transfer with different banks in Australia.
You won't be given more than you request, but the maximum limit you're approved for will depend on your financial situation.
When you apply for a credit card, lenders review your credit report. You're unlikely to be approved for a credit card if you have a low credit score, but your credit history (and existing debts) is something the bank will consider when determining your credit limit. This includes existing credit cards or loans and your current credit limits.
How much credit you're already accessing could impact the credit limit you're approved for on your new balance transfer card.
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Credit card providers use details of your income and employment to help determine your credit limit. Earning a low income, only working casually or part-time and even changing jobs could mean that you're approved for a lower credit limit than if you were working full-time.
However, it is less about the absolute numbers and more about how your income compares to your expenses. When you apply for a credit card, you will have to provide details of all of your sources of income as well as your expenses (rent or mortgage payments, childcare, groceries). If you’re spending the majority of what you earn (or more), it will be looked upon less favourably than if you were saving every month.
If you have been approved for a balance transfer credit card with a limit that’s lower than the debt you want to transfer, you can call the bank or credit card company and ask them for more information about this decision. While they may not be able to give you the full details, it could help you decide what to do next.
Let’s say you owe $5,000 on a credit card with an interest rate of 19.99% p.a. and can afford to pay $400 off it per month. If you stuck with this card as it is, it would take 15 months to pay off the debt and cost you $653.35 in interest.
Now, say you’re approved for a balance transfer credit card offering 0% p.a. for 18 months but can only transfer $3,000. If you went ahead with the transfer, you could split up your $400 payment between the cards to help save on interest.
For instance, if you paid $300 per month off the card with the $2,000 debt and interest rate of 19.99% p.a., it would take around 8 months to clear the debt and cost you $137.91 in interest. During this time, you’d also be paying $100 per month off your new balance transfer card’s debt. So after 8 months, the balance on that card would be $2,200 and you’d still have 10 months of the 0% interest rate.
If you then continued to pay $400 per month on the debt, it would take you 6 more monthly repayments to clear the debt. So in this scenario, you’d enjoy a 0% p.a. interest rate on your $3,000 balance transfer for the whole time before you paid it off.
Even if you aren’t approved for the full $5,000 balance transfer, transferring the $3,000 you’re eligible to transfer to a new 0% p.a. card saves you $515.44 in interest and you’d be out of debt one month sooner.
Keep these factors in mind when you’re comparing credit cards or applying for a balance transfer, so you can find an option that suits your needs.
If you’re looking for a balance transfer but your new credit limit will not cover your entire debt, you could also look at getting a personal loan to cover the debt left over on your original credit card. This could help you save on interest as you pay off the balance, as personal loans typically offer lower standard interest rates than most credit cards.
A personal loan could also be an option if you’re not approved for a balance transfer, or if the introductory 0% p.a. interest period has ended and you’re faced with paying a higher, reverted rate on your new card.
* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.
Let’s say that I have Credit Card A with a maximum credit limit of $15,000 and currently owing $500. Is it possible to apply for a Credit Card B with a maximum credut limit of $50,000 then do a balance transfer of $40,000 to my Credit Card A?
Hi Baily,
Thanks for contacting Finder.
Yes, you may request a Balance Transfer from your new credit card to your old one but this will be subjected for approval. In case that the amount that you will transfer is greater than your card’s credit limit, it will depend on the card-issuing bank if they will approve your request or they will accept only up to the limit that is allocated for Balance Transfer. Generally, credit card has an allocated amount for Balance Transfer transactions which can be between 80% – 90% of the card’s approved credit limit.
I hope this helps.
Cheers,
Ash