How balance transfer limits work

A credit card balance transfer is a very useful way to reduce the amount of interest you have to pay. However, the amount of debt you can transfer is limited by the balance transfer limit.

If you want to apply for a balance transfer card but don't know how balance transfer limits work, then this no-nonsense guide is for you.

How your credit limit affects the balance transfer amount

The credit card's credit limit, or the amount of money you are allowed to borrow, comes into play when transferring a balance from one credit card to another.

If you intend to consolidate debt from multiple accounts onto a single card using a promotional offer, you may not be able to transfer the entire outstanding amount because your credit limit is not high enough.

Should this happen to you, you can still transfer as much of your outstanding balance as possible to take advantage of the low interest rate and work towards paying it off. If a balance remains on the old card, there are options for dealing with that.

What is a balance transfer limit?

The balance transfer limit is typically a percentage of the credit card’s credit limit, ultimately determining how much debt can be transferred to a given credit card.

About credit limits

The bank determines your credit limit during the application process. It is based on several factors, including your credit history and affordability.

It is important to note that the credit limit could be lower than the amount you want to transfer.

How the balance transfer limit is calculated

The balance transfer limit is typically calculated as the percentage of the credit limit used for a balance transfer. Some banks allow the entire credit limit to be used for a balance transfer, but most range from 80% - 95%.

Therefore, if your credit limit was $2,000 and your balance transfer limit was 95%, you could transfer up to $1,900.

Some banks use a fixed dollar amount for their balance transfer limit.

Balance transfer limits per bank

While this is not an exhaustive list, we compared credit cards to find the balance transfer limits for banks that are prominent in the balance transfer market.

• ANZ: 95% of credit limit
• Bank of Melbourne: 80% of credit limit
• Bank of Queensland: 80% of credit limit
• BankSA: 80% of credit limit
• Bankwest: 95% of credit limit
• Citi: 80% of credit limit
• Coles: 80% of credit limit
• Commonwealth Bank: 95% of credit limit
• HSBC: 100% of credit limit
• NAB: 90% of credit limit
• Qantas Money: 80% of credit limit
• St.George: 80% of credit limit
• Suncorp: 80% of credit limit
• Virgin Money: 80% of credit limit
• Westpac: 95% of credit limit

Options if your limit is not enough

If your application for a balance transfer credit card has been approved with a credit limit lower than what you need, you may have to reconsider your approach. Here are some reasonable scenarios to consider.

Keep your old credit card

Balance transfer what you can, and pay off the balance on your old card as soon as possible. Assuming you got 0% on the balance transfer, you can use the money saved to overpay and clear the debt faster.

Apply for another balance transfer card

As long as you space out your applications adequately, you could apply for another balance transfer credit card and transfer the remaining balance from your old card to it. However, there are important considerations.

1. There is no guarantee that your application will be approved. A rejected application will have an impact on your credit score.
2. If you were approved, it is possible that the credit limit will still not be enough for your needs.
3. Don't forget that most banks charge a balance transfer fee.

Do another balance transfer to your new card

It may be possible to free up some available credit on your new credit card by making overpayments and then transfer some or all of the balance from your old card.

There are several issues with this.

1. Not all cards/banks will allow you to transfer a balance once the account has been opened.
2. Even if it was an option, you would not be able to transfer the balance at the promotional rate.
3. You may be able to request a credit limit increase to facilitate the additional amount, but there are pros and cons to that.

Apply for a debt consolidation loan

A debt consolidation loan is an alternative to a balance transfer credit card. Unlike a balance transfer card, you can apply for a loan of a specific amount. If approved, the funds will be transferred to your bank account, and you will be responsible for paying off your credit card.

Example

You've accumulated a debt of $1,000 on your current credit card, which charges interest at 19% p.a. Looking to save money and get out of credit card debt, you decide to apply for a balance transfer card with 0% p.a. for 24 months on balance transfers.

After your application has been approved, you find that have been granted a credit limit of $9,000 on the new card. However, the bank only allows up to a maximum of 80% of the credit limit to be used for balance transfers. This means you can only transfer $7,200 (80% of $9,000) to the new card.

• You transfer the maximum possible amount ($7,200) to the new card to take advantage of the 0% p.a. rate.
• You prioritise paying off the remaining $2,800 on the original card to negate its high interest.
• After clearing the original card's balance, you focus on repaying the transferred amount on the new card before the 24-month introductory balance transfer period ends.

FAQs

Can I get another balance transfer card if I can't transfer everything to one card?

You can do a follow-up balance transfer to another card with a different bank. If you have a bigger debt, you should look for cards with longer balance transfer periods and high credit limits. Note that there is no guarantee of approval.