Rate tarting means doing several 0% balance transfers.
There are some definite benefits to tarting. First, you may be able to eliminate the interest you are paying as you are transferring your balance to credit cards with 0% interest. You will be able to pay off your balance faster as you will not be paying any interest.
Doing a balance transfer is an excellent way to get rid of some of your debt with credit cards quickly. Introductory rates usually last for about six months so you will have that time to pay the debt off. You may be able to take advantage of several credit card offers and transfer more than one balance to credit cards offering 0%.
Downside of rate tarting
As with anything, there is a definite downside to rate tarting. Many people are finding themselves in large amounts debt with a credit card due to their unstoppable spending. One of the biggest issues with tarting is if you do not change your ways.
Here is an example; you have $10,000 in debt on one credit card and you transfer that debt to another credit card with a 0% interest rate. While you make the payments on the new credit card each month, you are also spending money on the credit card as well.
For instance, you may be using the credit card for purchases such as clothes, petrol, or food. When the introductory rate is over, you find that you owe more now than you did when you made the balance transfer, and your interest rate has jumped from 0% to 20%, possibly more than you were paying with your first credit card.
This is when rate tarting truly begins. Now you need to find another credit card with a balance transfer at 0% so you can transfer your balance again. This can end up being a vicious cycle. In the end, you can ruin your credit score and make getting new credit nearly impossible.
So, before you start rate tarting, really think about what it is. If transferring balances is a quick fix for you yet you continue to spend, then you should definitely stop. While it may be difficult, there are options for people who cannot seem to get out of debt. Debt counseling is available to those who find they are not in control of their finances any longer.
So while tarting may seem like a great way to pay off debt, it’s actually just a band aid and does not help you pay off debt at all.
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Posted on Monday, December 27th, 2010 at 12:12 pm
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