Rate Tarting Guide
"Rate Tart" is a term used to describe someone who searches the financial marketplace in order to find the best interest rates for his/her debts. As the word "tart" implies, the person does not show loyalty to any one credit card issuer: the rate tart looks at the associated costs of credit or debt and switches providers whenever he/she finds better rates. This guide primarily looks at the rate tart's approach to credit cards.
A little history
In times gone by, loans and credit cards often had high interest rates. It was also the norm to take out a loan or credit card and remain with the supplying bank until the debt was repaid: there was a sense of loyalty to a particular bank. In fact, it would be highly likely that you took out a loan with the same bank that you used for your current account.
Financial deregulation in the 1980's meant that banks started competing aggressively for more customers and this, in turn, led to a cutting of interest rates and the introduction of promotional offers to attract customers away from one bank to another. No doubt, you will have seen advertisements that show tables to illustrate the benefits of switching with phrases like "look how much you could save compared to these other products".
These advertisements and promotions have encouraged the public to realise there is little or no benefit to being a loyal customer. On the contrary, being loyal usual means staying with higher debt repayments. Consequently many customers began closing accounts and transferring debts to other banks lower rates. Having said that, most people do continue to remain loyal to their existing providers.
Today
As use of the internet became more prevalent, the ability to find cheaper products became even easier. Soon the banks recognised the need for highly competitive offers to attract new customers, so low rate or 0% introductory offers emerged. By offering rates that undercut other banks, they were able to draw customers with the intention of keeping them past the introductory period. After a short time, most banks were forced to offer equally competitive introductory rates and the rate tart was born! Moving debt from one introductory rate to the next, lowering the overall costs of the debt until it is paid off. The ideal scenario for the credit card rate tart is that they manage to move the debt between 0% introductory offers until the debt is fully paid off.
A rate tart can describe anyone with a credit card debt, a loan or a mortgage, anything that involves a sum of money that is repaid with multiple payments that incur interest charges.
Being a rate tart shows signs of good financial management and should not be seen as a banking trick or as something derogatory to the person with the debt.
Now read our Guide on how to rate tart with Credit Cards | Guide |
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