Basic questions on balance transfers

inretro

Hi,

I'm helping my girlfriend look at managing her credit card debt and we're both a bit stumped on a couple of key questions. She's currently got £8k on a Virgin/MBNA card, which until recently she'd just been paying the monthly interest on (around £200). Having just started a new job, she's keen to start reducing the debt, and it seems to make sense to do a balance transfer to reduce the cost of the debt in the meantime. We've read through Martin's main articles, but there are a few issues we're still stuck on

1) Is the credit limit published for the card also the limit that you can transfer in with a balance transfer? If so, is it possible just to transfer a part of the whole balance (many of the credit limits we've looked at are in the 1000 - 1500 range). Is this the limit the maximum you could get or an indicative value (given that your limit may be set according to the details of your application)

2) If we can't move the whole balance with one card, is it a good idea to try to do more than one balance transfer? We've had one application refused, but one accepted for a limit of 1000 (which we've not taken up yet, due to confusion around these issues!)

3) How do you pay the % fee on transfers? Is this amount simply added to your debt, or do you need to find this figure up-front in order to get the card?

4) We've signed up to CreditExpert as a couple of 0% card applications she tried were rejected. Is there any way to work out what it was on the credit record that caused the rejection? If unsuccessful applications are marked on your record (which we've not been able to find on CreditExpert) should we stop applying until we've worked out how to improve her credit score?

Any clarifications are much appreciated

Richard

[Deleted User]

I'd suggest you accept the £1k limit and stop any further applications, as all the recent searches will be counting against you. Transfer what you can, leaving room for the fee (which will be added to your balance).

Then start paying down the remaining interest bearing balance as soon as you can and make min payment plus £1 on the 0% card.

In 6 months, perhaps consider another application.

Credit limits are at the lender's discretion. I suspect the figures you've seen to date are the APR illustrations of £1200.

sfax

Unsuccessful applications aren't explicitly marked but credit searches are, and they are important. Stick to 2-3 applications max in any 6-month period and if you get rejected twice, don't apply again.

A lender can't see the difference between a successful application and a rejection but if they see 3+ searches close together, chances are you're desperate for credit and other people aren't lending to you

The % fee is just added to your balance. You can only transfer up to 95% of your credit limit usually

inretro

Thank you!

so to clarify, we need to leave 'space' under the credit limit to cover the transfer fee?

Apart from the first rejected application (I think Tesco), the subsequent couple of searches and applications were done through CreditExpert; they claim that applications using them as an intermediary do not appear on your credit record, but I have no idea if that's actually true.

I think you're right about the £1200 figure, it must have been displayed oddly on the CreditExpert list. And as our successful application was for £1k credit limit, should we assume we won't get much more than that, even if we go with a card with a higher fee, for example?

[Deleted User]

inretro wrote: »

so to clarify, we need to leave 'space' under the credit limit to cover the transfer fee?

Correct.

inretro wrote: »

And as our successful application was for £1k credit limit, should we assume we won't get much more than that, even if we go with a card with a higher fee, for example?

I think that would be a fair guess. You haven't stated your girlfriend's income, but £8k existing debt and presumably a credit limit higher than that will make new lenders nervous of piling more available credit on top of that.

JimmyTheWig

inretro wrote: »

Having just started a new job, she's keen to start reducing the debt, and it seems to make sense to do a balance transfer to reduce the cost of the debt in the meantime.

Good plan.

1) Is the credit limit published for the card also the limit that you can transfer in with a balance transfer? If so, is it possible just to transfer a part of the whole balance (many of the credit limits we've looked at are in the 1000 - 1500 range). Is this the limit the maximum you could get or an indicative value (given that your limit may be set according to the details of your application)

I've never seen credit cards with a limit to the amount of credit. Am guessing it's an illustration, and so your limit will depend on your circumstances.
But basically, yes, the credit limit will be the limit you can balance transfer. [Technically, generally, you can only transfer 95% of this limit.]
No reason not to transfer part of the balance.

2) If we can't move the whole balance with one card, is it a good idea to try to do more than one balance transfer? We've had one application refused, but one accepted for a limit of 1000 (which we've not taken up yet, due to confusion around these issues!)

You may as well take up the £1000 offered. You've suffered the search for it, so may as well reap the benefit.
If you can get other 0% cards then it would be worth doing more than one balance transfer. [But it doesn't sound like you will get them.]

3) How do you pay the % fee on transfers? Is this amount simply added to your debt, or do you need to find this figure up-front in order to get the card?

Technically, it will get added to the balance of the new card. That's why you're generally only allowed to transfer up to 95% of the limit, so you don't go over the limit when they add the fee.
But check the minimum payment rules. Often you have to pay the fee on top of the regular minimum payment as the first month's minimum payment. So, yes, in effect you have to pay it up front.

4) We've signed up to CreditExpert as a couple of 0% card applications she tried were rejected. Is there any way to work out what it was on the credit record that caused the rejection? If unsuccessful applications are marked on your record (which we've not been able to find on CreditExpert) should we stop applying until we've worked out how to improve her credit score?

They'll never tell you exactly what the problem is. Just look through the report and see if anything looks bad.
All applications will get logged (not necessarily with the credit agency that you're using) so too many applications is a bad thing.
Probably worth stopping applying for now.
Only thing that people sometimes miss is checking whether you are on the electoral role. But I would have guessed the problem is the large amount of existing debt. The credit card company can't be guaranteed that you're going to balance transfer the existing £8k and not run up further debt.


One thing I will add (and you may not want to tell your girlfriend this!) is that it is possible to apply for a credit card in your name and transfer the balance from her card to yours. If you've got a better credit rating then you would be more likely to be accepted with a higher limit.
The problem is that once you have done the transfer then the debt would be yours. If anything goes wrong between you then it would be up to you to repay your credit card.

sfax

JTW makes an important point on the credit limit. Even if you are intending to use a new BT card to pay off an existing card and then close it, the lender has to factor in the possibility that you might run them all up to the max and not pay any of it back