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What happens if you're denied for a balance transfer card or can't transfer all your debt
Balance transfers are a great way to get out of debt, but you may not be approved for a balance transfer card. Here's what to do if that's the case.
The Chase Slate® is not currently available to new cardholders. Please visit our list of the best balance transfer cards and best Chase cards for alternative options.
Balance transfers are a great debt-consolidation tool, but unfortunately not everyone will qualify for a balance transfer credit card. And even if you are, it may not be for the full amount of your debt.
These denials or limitations can cause consumers burdened with credit card debt to wonder what the next best repayment option is to get rid of debt once and for all.
Below, CNBC Select spoke to Rod Griffin, senior director of consumer education and advocacy at Experian, to find out alternative options for getting out of credit card debt when a balance transfer isn't sufficient.
What to do if you're denied for a balance transfer card
Balance transfer credit cards typically require good credit or excellent credit (scores 670 and greater) in order to qualify. Having good or excellent credit doesn't guarantee you'll be approved, nor does having less than stellar credit mean you won't be approved, but your qualification odds will likely decrease with a credit score below 670.
Griffin says that applicants who were denied for a balance transfer card should receive notice from the card issuer stating the exact reason why your application was denied. "If you were denied because of your credit score, the notice must include a score used by the lender and the risk factors that most affected it," Griffin explains.
"You should focus on the risk factors to understand the steps you should take to improve your credit history," says Griffin. This will increase your changes of being approved for future credit accounts with balance transfer offers.
He explains that some actions you can take to build your credit score include paying down existing balances to lower your utilization rate and catching up on missed payments.
In the meantime, you can consider balance transfer alternatives. A personal loan typically has more lenient credit requirements than a credit card. Asking a family member or close friend for a loan may also be an option for some people.
And finally, make sure you keep your accounts in good standing, so pay at least the minimum due each billing cycle. Consistent on-time payments can help you raise your credit score.
What to do if you can only transfer part of your debt
Even if you're approved for a balance transfer, that doesn't always mean you can transfer as much debt as you'd like. For starters, credit card issuers assign you a credit limit when you're approved for a card. Your credit limit is the maximum amount of money that can be charged to your card and can range anywhere from a couple hundred dollars to tens of thousands of dollars, depending on various factors, such as your income and credit history.
When you're approved for a balance transfer, card issuers typically limit the amount of your credit limit that may be utilized by transferring a balance from an existing account. The maximum you can transfer may be a percentage of your credit limit or a set dollar amount.
For instance, terms for the Chase Slate® credit card state: "The total amount of your request(s) including fees and interest charges cannot exceed your available credit or $15,000, whichever is lower."
So, if you receive a $20,000 credit limit for your new Chase Slate card, you will only be able to transfer up to $15,000 of existing debt to your new account. If your plan was to transfer $18,000, you would only be able to transfer $15,000 to your new card, leaving $3,000 on your old card. On the other hand, if you only received a $10,000 credit limit, you'd only be able to transfer a maximum $10,000 of your $18,000 balance, leaving $8,000 on your old card. Every balance transfer request varies and your card issuer will decide your limit based upon your circumstances at the time of your request.
Keep in mind the amount you can transfer also takes into consideration any new purchases charged to your new card. If you have a $20,000 credit limit and make $7,000 in new purchases on your Slate, you will limit the amount that can be transferred to a maximum of $13,000, leaving $5,000 on your old card (in the example used above, where you want to transfer $18,000).
"If you are facing a situation where you have so much debt you can't transfer due to credit limits, you should first focus on paying down your existing debts," Griffin says. "Understandably, this may be a challenge for many people given the financial implications we may be facing due to the coronavirus outbreak."
If you're facing financial hardships, Griffin recommends you talk to your lenders. Many card issuers are offering late fee waivers, pausing interest charges or allowing you to skip monthly payments. Keep in mind, the exact coverage you receive depends on your individual situation.
Learn what credit card issuers are offering for customer assistance amid coronavirus financial hardship.
Card issuers may also offer forbearance or deferment for a period of time, which means you may be able to suspend payments until the crisis improves. And if you take advantage of forbearance or deferment programs during coronavirus, Griffin says there will be no negative effect on the most common credit scores from FICO and VantageScore.
"In addition, at your request, lenders can also add a special statement to accounts, indicating that you've been 'affected by a natural or declared disaster,'" Griffin says. "Some scoring systems will consider accounts with the statement as 'neutral,' meaning they will have no negative effect on that score."
It's a good idea to call and ask for this statement to be included on your account to minimize potential harm to your credit score.
"Contacting your lenders early can help you protect your financial health in the long run," Griffin says.
Information about the Chase Slate® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.