Rate tart

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It has been suggested that this article or section be merged into Stoozing. (Discuss)

Coined in a 2004 survey, the term 'Rate Tart' refers to the growing number of consumers who use credit cards to get interest free loans. Rate Tarts move the balance of their debt onto a credit card that offers an interest free period, moving it again when the introductory offer expires so that they never pay any interest.

The credit card companies first introduced 0% balance transfer offers to encourage people to move their debts onto a new credit card in the hope that they would pay interest once the balance period ended. 0% credit cards were in some ways the embodiment of the low interest, cheap money environment of the late '90s and early naughties. But with so many companies offering these 0% balance transfer offers with no exit penalties, people simply moved their debt from one card to the next as the 0% period expired – and the Rate Tart was born.

Eventually 0% deals were reined in as credit card providers realised they were losing out. Credit Card companies have added balance transfer fees to limit their losses (they charge you a fee for transfering a debt balance to a 0% card). These are typically set at 2-3% of the balance transferred, and usually (but not always) have an upper limit to the amount charged. Despite this, there is still plenty of money to be made from moving debt around to make sure you are always paying the lowest possible rate.

Articles in the press and some financial industry experts have implied that being a Rate Tart means being careless, short term-ist or even ignorant when it comes to money. They point out that levels of personal debt are high. Against this backdrop, Rate Tarts are accused of running up bills on credit cards and personal loans and saving nothing for the future.

There's another body of opinion that suggests that the very fact that people are making credit card offers work for them should be seen as a positive step. Understanding how the deals work and keeping track of when they expire demonstrates sound financial management.

Rate Tarts show that Brits can be savvy with their cash, putting an emphasis back on the financial services industry to provide the kinds of products that people want to put their money into. As if to emphasise the point, experienced Rate Tarts are also now applying their skills to other products such as savings accounts, mortgages, utilities and others.

More recently the press has reported that Rate Tarts risk damaging their credit rating by repeatedly applying for credit cards. There is some truth in this. If you apply for many cards within a short time period, you risk appearing to the credit rating agencies that you have a desperate need for credit and are therefore a credit risk.

But if you compare products carefully and only apply for a small number of products, this is unlikely to damage your credit rating. There rules are not written in stone, but as a rule of thumb you shouldn't apply for a new card more than once every few months. Calling the credit card company and closing your account once the introductory offer has expired and the outstanding balance has been transferred will reduce the total amount of credit you have access to and help protect your credit rating.

Being a Rate Tart is sometimes referred to as Stoozing.