Credit card balance transfer is one of the most cost effective facilities to get out of debt as it helps in saving good amount of money due to low interest rates offered on the card and time frame given to pay off the due. And it is a win-win situation for both the parties i.e. card holder and the issuer.
However many a times, such applications can get denied due to following reasons:
- Poor credit history: Once you get in a bad book of the card company due to frequent payment defaults, convincing another card company to balance transfer outstanding amount becomes very difficult. Because they have a strong reason to show that your repayment capacity is poor and that in future you will continue to be an intentional defaulter.
- Balance does not meet minimum and maximum amount requirement: Every card issuer who is ready to offer you a balance transfer has a minimum and maximum amount that can be transferred. For e.g. State Bank of India has a minimum balance transfer amount set to Rs. 5,000 and maximum amount of 75% of the available credit limit. Although most of the balance transfers are done due to overdue amount which is in 5 figures.
- Credit card is newly purchased: Let’s say you have only card with an outstanding balance of Rs. 50,000 due by June’15. But you are unable to pay this amount and in the meantime you buy a new credit card from some other company with an intention to balance transfer as quickly as possible to avoid high interest rate. However when you request this new issuer for a balance transfer old credit card, they deny it despite of good history of repayment. Reason for the denial can be the period for which you have been using the card is very less and the card company cannot evaluate whether you are credit worthy or not.
- Credit limit on your existing card is very low: If your due amount is Rs. 1, 00, 000 but another card has a credit limit less than this amount then your application will be rejected.
- Transferring between the same issuer: If you hold 2 credit cards of ICICI bank and want to balance transfer between these cards then you will be denied. Because debt shifting is possible only between two different card issuing companies.
- Balance transfer is requested for an add-on credit card.
- If you not a resident of India then balance transfer option may not be possible for you. Check out credit cards for NRI in India.
- You already have an overdue amount on the card to which you are transferring the balance.
Not all the above reasons are considered by the lenders as everyone has their own statistical methods to calculate eligibility.
However if you get qualify for credit card balance transfer and are about to buy a new card or moving the balance to an existing card, calculate the money you will save by checking the interest rate & processing fee. Both these numbers should be as low as possible. It should not happen that you end up paying more post the transfer. Other crucial factor to make a note of is the annual interest rate charged once the teaser/interest free period is over and the interest rate on purchases made using the new card. It is always recommended to know the hidden charges on your credit card.
Although issuers welcome such applicants wanting to balance transfer credit card of some other companies because they get a new customer and life time value of each card holder is high.