11th July 2006

A 'rate tart' is a phrase used to describe a consumer who constantly chases the best deals and regularly changes card provider.

Millions of card users have realised that it's relatively straightforward to avoid paying interest on card debts by transferring them from one introductory 0% deal to another.

It is estimated that 'rate tarting' is costing card companies up to £600 million a year. As a result card issuers have introduced a number of measures to try an repel the rate tarts and make more money from new customers, including the following:

Introduction of balance transfer fees

When 0% deals first arrived in 2000 and up until 2004, there wasn't a single card issuer who charged fees on balance transfers. However all the changed when the UK's biggest card company Barclaycard introduced a 2% fee in August 2004, capped at £35. By December 2005, nearly half of all 0% cards charged fees which were typically capped to a maximum of £50.

However more recently card companies including Lloyds TSB, Virgin Money and Halifax/Bank of Scotland have now removed the cap, making larger balance transfers less attractive.

On 1st July 2006, Virgin Money increased its 0% balance-transfer period from nine months to a year, but as the same time it removed the £50 cap on its transfer fee, making it an uncapped 2% (minimum £3). So if you transfer £5,000 to the card, you'll be charged £100.

On 10th July Halifax/Bank of Scotland One increased its transfer fee from 2% to an uncapped 3% and other issuers are expected to follow this trend.

Limiting the amount which can be transferred

Another tactic which is increasingly being employed is limiting the amount which can be transferred. For instance Barclaycard charges 0% on transfers up to £5,000; anything above is charged at 6.9% APR.

Tightening of credit scoring

Issuers are tightening their application requirements and credit scoring in order to weed out 'rate tarts'. Furthermore, people with good credit records are being turned down for the best rates as cynics argue that companies don't want your business if you're going to pay your debt off straight away as the card issuer won't make a penny out of you.