How do balance transfer cards work in terms of credit limit, please? (with my real example) 24 November 2022 at 9:28AM in Credit cards 8 replies 247 views

SubaruSeb

Hi: Sorry if this has been asked a million times before, but I would like to know please how balance transferring to a 0% credit card works in terms of credit limit?

I have just one credit card, with a £20,000 limit, £6,000 balance left to pay, and an interest rate of 23%.

Each month, I pay £500 to it, because I want to pay off my debt A.S.A.P, but the interest is about £125, so I am thinking of doing a Balance Transfer to a 0% card, if I find one that will give me the £6,000 limit I need to transfer the full amount.

My current card says my limit is £20k, but is this my official credit limit, or just for THIS card? If I apply for a £6k BT card, will this mean I'm exceeding my credit limit by requesting £26k, or does it work different to that? Sorry to sound stupid, but I want to be sure, without affecting my credit rating negatively as well.

I did consider negotiating with my current card, which I have had for 15+ years, but I doubt they will reduce much and I will still be paying interest, which I would rather the £500 or more I pay each month will go to pay off my debt.

Thankyou very much.

MorningcoffeeIV

The £20k is your official limit for that card.

Any additional cards will give you their own official credit limit.

grumbler

SubaruSeb said:

I did consider negotiating with my current card, which I have had for 15+ years, but I doubt they will reduce much and I will still be paying interest, which I would rather the £500 or more I pay each month will go to pay off my debt.

For many CC cards you can see offers available to you in your online account. Check yours.

SubaruSeb

MorningcoffeeIV said:

The £20k is your official limit for that card.

Any additional cards will give you their own official credit limit.

Thankyou. Therefore would it be a good idea to reduce the credit limit on my existing card from £20k to say £10k before I apply for a 0% BT card to transfer the £6k balance to, or doesn't it make a difference?

MorningcoffeeIV

No. Keep your limit as it is.  Don't send signals that your current sole lender is losing faith in you.

cymruchris

I think you're intimating that the £20k limit on your existing card is your 'universal official limit' across any credit accounts. If that's the case, there's no such thing as a universal limit. Each provider of credit will assess your circumstances, and then decide what limit to offer. They will take into account that you do have a £20k limit in their calculations, as will they look at the fact that there's £6k balance, and whether you've ever been late paying, and a long list of other factors.

Firstly - don't change anything with your existing card.

Secondly - have a look around for balance transfer deals that interest you - and see whether the card provider offers an eligibility check on their own website (Don't use comparison check websites). Then try out a few eligibility checkers and see what kind of response you get. (Eligibility checkers won't create a hard search - and so you can check as many as you like)

Some providers like MBNA, Santander, John Lewis, Lloyds, Nationwide offer provisional credit limits when eligibility checkers are used - so you may get an idea of what credit limit you'll be offered. If you find a balance transfer card only offers you a £4k limit - and that's the only option - still take it - and transfer £4k - as you'll then only be paying interest on the £2k left at your existing card.

[Deleted User]

cymruchris said:

I think you're intimating that the £20k limit on your existing card is your 'universal official limit' across any credit accounts. If that's the case, there's no such thing as a universal limit. Each provider of credit will assess your circumstances, and then decide what limit to offer. They will take into account that you do have a £20k limit in their calculations, as will they look at the fact that there's £6k balance, and whether you've ever been late paying, and a long list of other factors.

Firstly - don't change anything with your existing card.

Secondly - have a look around for balance transfer deals that interest you - and see whether the card provider offers an eligibility check on their own website (Don't use comparison check websites). Then try out a few eligibility checkers and see what kind of response you get. (Eligibility checkers won't create a hard search - and so you can check as many as you like)

Some providers like MBNA, Santander, John Lewis, Lloyds, Nationwide offer provisional credit limits when eligibility checkers are used - so you may get an idea of what credit limit you'll be offered. If you find a balance transfer card only offers you a £4k limit - and that's the only option - still take it - and transfer £4k - as you'll then only be paying interest on the £2k left at your existing card.

Generally it's only possible to transfer up to 90% of the credit limit including transfer fee so a 4k limit card you'd be able to get about 3600 on it but otherwise correct

SubaruSeb

Thankyou for your helpful replies.

Yeh I was wondering if there is a universal credit limit.

I have done what you advised, left my existing card as it is, but applied fir a 0% BT. It was successful, credit limit of £10,000 given, so can comfortably transfer my balance and pay it off sooner.

cymruchris

SubaruSeb said:

Thankyou for your helpful replies.

Yeh I was wondering if there is a universal credit limit.

I have done what you advised, left my existing card as it is, but applied fir a 0% BT. It was successful, credit limit of £10,000 given, so can comfortably transfer my balance and pay it off sooner.

Good luck in getting it down before the 0% expires - fingers crossed you can, it may be a little tougher in the future to get another card/0% offer if things worsen credit wise, but we'll have to wait and see. Until then pay off as much as you can