What to Do If Your Balance Transfer is Denied

A 0% introductory APR on balance transfers – typically running from 12 to 21 months – are one of the most compelling features of many credit cards.

And they’re usually offered when you first open a credit card account, typically within the first 60 days.

If you have high interest credit cards, a 0% introductory APR on balance transfers can provide welcome relief from other cards that may have interest rates well above 20%.

But most credit cards also offer balance transfers as a standard feature.

Even without a low introductory APR offer, transferring the balance from a credit card with a 23.9% interest rate to one with a 13.9% rate -- for example -- can save you $1,000 on a $10,000 transfer in just the first year.

But what happens if your balance transfer is denied?

It may not happen often, but it does happen occasionally.

And when it does, it can come as a complete shock.

Reasons Why a Balance Transfer Request is Denied

The denial of a balance transfer can happen seemingly without warning.

Truly, though:

A warning may have come in the mail or delivered to a remote corner of the card issuer’s website you seldom visit.

But since most cardholders are bombarded by a steady stream of notifications and offers from their credit card companies, the warnings often go unnoticed.

Even if you’re not aware in advance, a balance transfer request can be denied for one of several reasons:

Balance transfers may have been eliminated by the card issuer

Though your credit card may initially have provided for balance transfers, the privilege may have been withdrawn.

Credit card issuers do adjust features, sometimes adding new ones and other times removing existing ones.

Notification of the elimination may have been buried in the fine print of an updated disclosure.

Balance transfers have limited dollar thresholds

Even on a card that allows you to use the entire credit line for balance transfers within the introductory period, most credit cards limit how much of your credit line you can use for subsequent transfers.

For example, a card with a credit limit of $10,000 may limit balance transfers after the first 60 days to no more than $2,500.

If you attempt a $5,000 balance transfer, it may be declined.

Inadequate credit limit

This can occur if you charge more on your credit card than you realize.

For example, let’s say your card has a limit of $5,000.

Based on last month’s statement you’ve used $2,000 of that limit. Believing you have $3,000 available you attempt a balance transfer for $2,500. But the transfer is rejected because you have $700 in additional charges since the last statement came out.

That will leave you with just $2,300 in available credit, which is insufficient for the balance transfer.

Still:

Another credit limit "gotcha" situation involves balance transfer fees.

These are easy to forget, and while they usually are limited to 3% of the balance transferred within the introductory period, they commonly revert to 5% thereafter.

If you are attempting to do a $4,000 balance transfer, a 5% fee will reduce that by $200.

That may cause you to exceed your available credit limit, or your balance transfer limit.

You attempted to transfer a balance from a card from the same issuer

In still another fine print provision, a credit card issuer may prohibit balance transfers its cards.

While they may be perfectly willing to grant you an opportunity to lower the rate you’re paying on other credit cards, they don’t want to include their own cards in that offer.

After all, the transfer will mean less revenue for the card issuer.

You make frequent balance transfers

Let’s face it, 0% introductory APRs on balance transfers are attractive.

But if you apply and are approved for these cards too frequently, either your application for a new card may not be approved, or your ability to use a current card to make balance transfers may be restricted or prohibited.

Credit card issuers may see frequent balance transfer activity as a potential risk factor. It may indicate the use of one card to pay another.

A decline in your credit score

The best balance transfer credit cards are typically offered to those with good or excellent credit.

You may have been approved for a credit card with generous balance transfer privileges back when you had a credit score of 730.

But if your score drops to 650 a year later, you may no longer be allowed to complete balance transfers.

Be aware:

Credit card issuers reserve the right to check your credit for as long as you have an active card account.

If your credit score falls below a certain limit, balance transfer capability and other privileges may be withdrawn.

You may even see your credit limit reduced or your interest rate increased.

This is also how a current credit card issuer will be able to determine that you make frequent balance transfers.

Steps to Take if Your Balance Transfer Request is Denied

If you've been denied for a balance transfer, it's important to find out why and learn what you can do to improve your chances of getting approved next time.

Contact the card issuer

The card issuer will send you a letter notifying you of the reason for the decline.

This will also give you access to the credit report that provided the damaging information, if in fact credit was the reason for the denial.

But if the balance transfer request is denied on an existing credit card, you’ll need to contact the issuer and find out exactly what the reason is.

Fix the issues

It could be any of the reasons listed above, some of which can be corrected or adjusted for.

For example, if the reason for the denial was an insufficient credit limit, you may be able to opt to either pay down your credit card balance or request a lower balance transfer.

But if the reason is because you have a very limited balance transfer credit limit or the balance transfer capability has been removed, your options may be limited.

If a low credit score is the reason for the denial, you’ll need to get a copy of your credit report and see where you need to make improvements.

At that point, the credit card issuer may inform you of the minimum credit score you’ll need to have your balance transfer privileges restored.

You can then make whatever changes are necessary to raise your score to a level sufficient to be able to resume balance transfers.

Monitor your credit

This makes a strong case for regularly monitoring your credit.

If you go months between checking your credit score, it’s possible the score drifted downward.

This can happen for a number of reasons, including a steadily increasing level of outstanding debt or errors appearing on your credit report.

These problems can take time to resolve but are easily avoided when you monitor your score regularly.

Should You Take a Partial Transfer if it’s Available?

The short answer is yes!

Even you can’t get the full balance transfer you had hoped for, a reduced transfer may still be a viable partial solution.

For example, let’s say you were hoping to transfer $5,000 in high-interest credit card debt to a new credit card with a 0% introductory offer for 18 months.

But for different reasons, you find you can only transfer $3,000. Since the balance on the other credit card is subject to an interest rate of 24%, moving even $3,000 in the balance transfer will save you $720 in interest in just the first year.

Even though that’s not the full transfer you hoped to make, it will still improve your financial situation.

Not only will you save money on interest, but those savings can be applied to reducing your credit card balance after the transfer.

That will allow you to reduce your credit card balance faster than you would if you hadn’t taken the partial transfer.

Alternatives to Consider if Your Balance Transfer Request is Denied

You may or may not remember the credit situation from the last recession in 2008.

But as it unfolded, consumer credit profiles deteriorated, credit card issuers became more restrictive, and some even cut credit limits on existing cardholders.

Try another issuer

If your ability to do a balance transfer from your current credit card has been restricted or eliminated, the best strategy is to apply for another balance transfer credit card from a different issuer.

Consider a personal loan instead

Failing that, the next best option may be to apply for a personal loan. These are unsecured loans – not credit lines – with a fixed loan amount, interest rate, term, and monthly payments.

In many cases, the interest rate you’ll pay on a personal loan will be much lower than typical credit card rates.

However:

Don’t expect to get a 0% introductory APR.

While personal loans are increasingly available through online peer-to-peer platforms, like Lending Club and Prosper, they often have high interest rates.

They also typically have another cost that’s not commonly discussed, which is an origination fee. That can be as much as 6% of the loan amount you’re applying for.

A better source of personal loans will be a bank or credit union.

Not only do they provide lower interest rates, but most don’t charge an origination fee.

And since the loan will have a fixed rate and term (usually for much longer than a typical introductory balance transfer credit card APR), it’s a good strategy for paying off high interest credit card debt.