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Rate tarting is where you regularly transfer your credit card balance from one card to another as the interest free periods come to an end in order to avoid paying any interest on your credit card balance.
This is a method that is used by many people with 0% balance transfer credit cards. If you are considering becoming a rate tart you should bear some important facts in mind:
- Many credit cards charge a fee for transferring your balance, so you may have to pay a percentage of the balance that you are transferring each time you transfer to a different card.
- You need to make sure that you keep on top of the dates that your interest free periods are due to end so that you can get your application in for a new balance transfer card in time.
- If you are able to repay your balance in full before the interest free period ends on your card there will be no need to rate tart.
How does rate tarting work?
Rate tarting involves regularly changing your 0% balance transfer credit card as the interest free period is coming to an end to ensure that you never have to pay any interest on any remaining balance. With a 0% balance transfer credit card you are given a specified interest free period within which to repay the balance without incurring any interest. Once this period has expired you will normally have to pay higher than average interest on any remaining balance.
If you do not think that you are going to be able to clear the balance on the credit card you can simply switch to another interest free credit card when the interest free period on your existing card ends. And again, if you still have a balance on the new card when the interest free period is coming to an end, you can switch yet again, and so on. This is how rate tarting works, and when conducted effectively is can save you a small fortune in interest on your balance.
You do have to be pretty organized in order to be a rate tart, as you need to keep an eye on when your interest free periods are drawing to an end in order to provide you with adequate time to apply for a new 0% balance transfer credit card. It is a good idea to log down dates in your diary, so that you know exactly when to make your new application in order to transfer your balance again before you start getting charged interest.
Another thing that you need to bear in mind is that most credit cards charge a percentage of the amount that is being transferred for the privilege of transferring your balance and paying no interest. So, if you are rate tarting you may find yourself having to pay a percentage of the amount that you transfer each time you transfer your balance to a new credit card.
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