High debt? Don’t plan high balance transfer.

This post originally appeared August 6, 2015 on CreditCards.com as “How banks limit the size of your balance transfer.

By Barry Paperno

Dear Speaking of Credit,
Is there any way of knowing how much of a balance transfer a card that you are applying for would approve? I need to transfer $10,000 and after applying for the Chase Slate Card, was told that I only qualified to transfer up to $2,600. I didn’t feel that was worth opening another card.

We currently owe $10,000 to American Express and the same to MasterCard. We are looking to transfer $10,000 of it. I don’t want to have more than three credit cards open. I would like to keep the card open (with a zero balance) that I transfer the funds from, our American Express and the new one with the 0-percent interest rate. I’m thinking that more than three open cards will not look good when running a credit report.

Bottom line, we owe $20,000 total and we don’t know the best way to pay it off. Your advice would be great! Thanks so much! — Mary

Dear Mary,
I can see you are a prudent credit card shopper who doesn’t enter into new credit card relationships frivolously. At $20,000 total debt, however, I don’t have to tell you that you’re paying exorbitantly high interest each month and that your credit scores are no doubt suffering from carrying such a large amount of debt.

While saying you want to pay off these two balances, you haven’t said whether you will have the funds on hand any time soon to begin making a noticeable dent through higher monthly payments. I hope you realize that regardless of lower — even 0 percent — interest rates or other more favorable balance transfer terms, at some point you’re going to have to apply sizable amounts of cash to these balances. But we don’t know your cash situation, so, though important, I won’t address paying them off at this time.

Understandably, you are disappointed with the low balance transfer limit you were assigned by Chase Slate. Yet, I see things somewhat differently. The fact that, despite your high debt, you still managed to win approval for some additional credit, albeit “only” $2,600 indicates that the half of your score made up by the payment and length of credit history scoring categories was strong enough to help compensate for the negative impact of your high card balances. In other words, your score could have been a lot worse.

The best way to explain why you were only given a $2,600 balance transfer limit by Chase Slate is that it’s largely a case of Catch-22. That is, the high debt amount you’re trying to pay off is suppressing your score, which sends a negative signal to the bank that then severely limits the balance transfer capabilities that could otherwise help you lower those balances faster.

To be clear, there are no factors or calculations within the credit scoring formula that determine or recommend how much credit a lender should extend, whether in the form of a loan, line of credit, credit limit, cash advance or balance transfer.

Yet, your credit score has some bearing on all such credit decisions. Typically, the higher the score the more debt the bank is willing to let you take on, with each bank having its own additional lending criteria based on such factors as income, whether you rent or own, your length of time on the job and any prior credit experience you may have had with that lender.

Playing the hand you’ve been dealt by Chase Slate, consider that any amount of money saved by paying lower interest is better than nothing. Therefore, I see no reason not to go ahead and transfer $2,600 of that $10,000 American Express balance, assuming the Slate balance transfer terms are more favorable than what you’re seeing with either of your other two cards.

Again looking on the bright side, this step puts you a little more than a quarter of the way toward your goal of transferring $10,000. Then, once you’ve transferred that smaller amount, you might want to periodically apply for additional balance transfer cards without worrying about whether the limits are low, since with your debt level’s impact on your score, similar low limits are going to be a fact of life for some time.

But won’t adding more accounts take you over that three-open-cards mark you seem to believe is vital to your credit score? Yes, it will. But don’t worry about it. While you certainly don’t want to go on an “apping” spree, opening a few more cards won’t hurt your score in the long run and any short-term negative impacts should be put in perspective while you have this mountain of debt to contend with.

Another piece of positive news is that by having already added $2,600 to your available credit (credit limits), you may already have raised your score by reducing your credit utilization (balance/limit) percentage.

To give you an idea of how this works, since we don’t know the credit limits on your two cards, let’s say you have maxed them out at $10,000 each. Here’s how adding that $2,600 to the limit side of the equation might have impacted both your individual and combined utilization:


Card  Balance Limit Utilization
 American Express  $10,000  $10,000  100%
 MasterCard  $10,000  $10,000  100%
 Combined  $20,000  $20,000  100%


Card  Balance Limit Utilization
 American Express  $7,400  $10,000  74%
 MasterCard  $10,000  $10,000  100%
 Slate  $2,600  $2,600  100%
 Combined  $20,000  $22,600  88%

In this example, your combined utilization drops by 12 percent simply by adding the Slate card. What this also illustrates is that with each additional card you add — without raising your total debt — your utilization drops further. This can then help raise your score, which can begin to qualify you for higher future balance transfer limits and better terms down the line.

Such a strategy, as with paying down your debt, will take time, especially since opening new cards initiates a mix of scoring factors, some positive and some negative:

  • Positive (long-term) = additional available credit (amounts owed category is 30 percent of your credit score).
  • Negative (short-term) = lower average age of accounts (length of credit history category is 15 percent of your credit score) and additional hard inquiry (new accounts category = 10% or score).

Patience will be a virtue in your situation if you can resist the temptation to apply for new cards too soon or too often. By waiting at least about 6 months between card applications, you can give the score time to recover from some of the short-term negative aspects of new account openings, which, if you’re not careful, could result in denials that leave you with new inquiries and no additional credit availability.

In terms of the number of cards the score likes to see, there is no one-size-fits-all ideal guideline to follow. But it’s safe to say you should be able to eventually accumulate around seven cards without incurring any long-term downside to your score. What you should start to see is a higher combination of limits along with lower balances steadily reducing your utilization, raising your scores and bringing better future balance transfer offers — all in an effort to retire that debt once and for all.

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