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Credit cards are a convenient and user friendly method of paying for ones purchases. They are cards issued by credit card agencies to their customers. They provide money on credit. This credit has to be paid periodically within the stipulated period or, the credit would incur finance charges. It is human tendency to often misuse what comes easily. The value of it is only understood when there is a dearth of that luxury. In the same way, credit cards offer all the money in the world by a mere swipe of a card. This can often lead to enormous problems. If a person does'nt uses a card diligently he could end himself in debt. There have been instances where the finance charges have gone up to a mammoth 23%. Such situations pose a herculean task for an individual to clear his debt. This would also lead to the creation of a bad credit history.
There are various options which an individual could consider to crawl his way out of credit card debt. Opting for a balance transfer card is one such option.
Continuing with a card company having a high rate of interest would prove difficult for an individual to pay his debt. In such cases few cards known as the balance transfer cards offer to pay this credit and transfer it to their card agency. These cards usually offer lower rates of interest than that compared to the former. There types of interest that such cards might offer are promotional rate, variable rate and low fixed rates of interest.
One has to tread carefully before deciding on a balance transfer card. Cards having a promotional scheme lure customers with irresistible low rates of interest .This rate is only applicable for a promotional period. On completion of this term and the failure to the pay the credit the interest rates rise exponentially.
Based on ones credit history and a number of other factors a person gets a credit score. These points are extremely helpful when one is applying for a loan, as a good score reflects a person's credit worthiness.
Influence of balance transfer cards on the credit score.
Credit utilization
Credit utilization is the difference between the credit made and the credit limit that is offered by the card company. The credit score is directly proportional to the difference. The higher the difference the higher will be the score. While transferring credit from a company with a high credit to one with a low credit limit the credit utilization increases hence the score decreases.
Credit age
It is an indicator of the duration of credit account usage. This accounts to 15% of the credit score. The greater the number of new accounts opened the lower the score.
Credit card applications
The applications for a credit card add up to 10% of the credit score. Hence applying for a transfer card could dent your credit score.
