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:
- Cancel the application. If you haven’t received or activated the card, you can call the issuer and ask them to cancel the application. There should not be any charge for this.
- Cancel the card. You can cancel your new card at any time after it’s been activated. But make sure you do this before the balance transfer has been processed. Also note that if the card charges an annual fee, you may need to pay it before the account can be closed.
- Go ahead with the transfer. If you’ve got a balance transfer credit card with a competitive introductory 0% interest offer, then you may still want to use it to pay down whatever debt can be moved to the card. Just remember to budget for repayments on your existing card and, if possible, aim to pay off the debt that’s still being charged interest first to help keep your costs down.
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.
Why would only part of my balance transfer be approved?
Here are some of the reasons why you may be unable to transfer your entire debt to a new balance transfer credit card.
Maximum balance transfer amounts
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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Income and employment
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.
How can I find out why my credit limit is lower than my balance transfer amount?
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.
Example: Is getting a partial balance transfer worth it?
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.
What else do I need to know about balance transfers and credit limits?
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.
- Applying for another card. If your balance transfer card is approved with a credit limit that’s lower than the debt you want to transfer, you could consider cancelling that card and applying for a different one. But keep in mind that applying for several cards in a short span of time can negatively impact your credit history and, in turn, may make it harder to get a balance transfer approved.
- Credit cards with high credit limits. There is a range of credit cards that offer high minimum credit limits of say $6,000 or $15,000 (subject to approval). If you have a lot of debt, you could look for balance transfer offers on one of these cards. Just make sure you meet the application requirements before you apply because these cards also typically require high minimum incomes.
While it’s ideal to get approved for your entire balance transfer, there are times when the debt you have could be higher than your card’s approved credit limit. So if that happens, make sure you weigh up your options to decide if the balance transfer will still suit your goals.
Tip: Consider a personal loan to pay off some or all your debt
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.
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