Credit Rate Tarts |
Credit Card Applications for Rate Tarts Become More Expensive
What does being a rate tart mean and what impact does it leave on one's credit scores? A rate tart is a credit consumer who tries to keep his debt or debts at 0% rate by constantly transferring balance from one card to another. A credit card with 0% intro period on balance transfers is a tart's major tool as it helps them to repay the debt without paying any interest at all.
Until recently, the cost of transferring the balance was quite acceptable, about 2-3% of the amount transferred, and lots of smart cardholders rushed to take advantage of this relatively cheap convenience of killing debt. Things have changed since all that turmoil on the credit and financial market started.
The transfer fee cap, usually amounting to 2-3% of the total amount being moved, is being eliminated by a growing number of issuers, thus crippling consumers in their game of killing the debt for free.
Most credit card applications with balance transfers do still offer the minimum 3% of the transfer fee but their maximum may reach as much as $75, reducing the saving benefit to nothing.
The issuers' new requirements are treated as a natural response to the strained situation on the housing and credit card market when credit providers lose profits due to the growing defaults on the one hand and interest-free line of credit (due to timely and full monthly payments) on the other.
Rate tarts do not bring much revenue to creditors, either, because they use the credit card only as long as the 0% intro period for balance transfer is on. When the interest free period expires but the card is still carrying the debt, the customer applies for another balance transfer plastic which also offers 0% intro period and another opportunity to pay no interest.
The bank does not lose anything having a rate tart as a customer but a great profit is also out of the question. Lenders want more, so they compensate for the unearned interest with increased transfer fees.
If you plan to use balance transfer to save on repaying the debt, see to it that the cost of the transaction does not counteract the advantage of the interest free intro period.
Now, as to the possible impact of transferring balances. Equifax (one of the national credit bureaus) representatives assure that rate tarting will not damage one's credit rating if you apply for another card in no sooner than in 6 months. Your old credit card will be shown as paid off and the new lender will see you as a responsible and creditworthy customer.
Sometimes, balance transfer is considered to be a mutually profitable deal even, because customers get an interest free loan and banks add a new good credit client to their customer base. No caps on balance transfer fees are expected to bring even more benefit to banks but will it meet the saving purposes of rate tarts?
B Critchfield
April 3, 2009, 12:53 am
If you have never been late or missed a payment on the Chase credit card account, and if your overall credit history is good, you can try making a balance transfer onto a lower rate credit card. When you make a balance transfer, your $21,000 balance is moved onto another account and you then owe this amount to the new bank you made a balance transfer to. The benefit of making a balance transfer is that you can then pay off the debt faster due to the much lower introductory interest rate. We can suggest three balance transfer cards that you may be interested in reviewing:
The Discover More® Card and More® Card - American Flag are designed for those with very good credit who want to make a balance transfer and pay off debt at a 0% introductory interest rate for 12 months. Both of these cards also offer a 0% intro APR on purchases and a cash back reward program.
You can also consider making a balance transfer onto the True Earnings® Card from Costco and American Express, but keep in mind that its introductory interest rate is only valid for 6 months.
You should be aware that your ability to qualify for one of these balance transfer cards depends on factors other than your credit history. For example you may not qualify if your credit-to-income ratio is too high, if you are at a risk of losing your job or if you are attempting to transfer an amount which is larger than the limit on the card requested.
In conclusion, we should mention the fact that you can pay off your $21,000 balance after your Chase account has been closed. Of course, this will damage your credit score because the account will be reported as “not paid as agreed”. However, if you continue making timely minimum payments on the balance, your credit score will gradually rise again.
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