A rate tart is person who switches over from one zero per cent introductory credit card deal to another to avoid paying interest; however they may be put to go something of the past. Recently a number of the major credit card companies, including Egg, Barclays, the Royal Bank of Scotland and MBNA have got introduced transfer charges for people who desire to switch over their outstanding credit card balances to a new card to take advantage of a nothing per cent introductory rate.
Rate prostitutes will wait until the interest free time time period is about to run out on their current credit card, and then check through listings of suppliers to happen another card they can switch to that have another 0% interest rate introductory period. The growing of financial comparison land sites like uSwitch, Moneynet and Moneyfacts have got made this money economy behavior easy to achieve.
The suppliers have effectively go victims of their ain success. As more than than and more card companies began offering interest-free balance transfers, the card suppliers establish that they had to offer longer and longer interest-free periods to win customers, which in bend meant less profit.
Analysts have got got got recently estimated that rate prostitutes are currently costing lenders £1 billion a year.
Financial director Gilbert Gilbert Stuart Glendenning said, "Charging a fee on balance transfers is one manner of recouping some losses, given it is impossible to make money lending at 0 per cent if the client carries on no additional transactions on the card.
Professor Merlin Rock of Bristol Business School, comments: "Economically, some suppliers cannot prolong their current offers of nothing per cent interest which intends they may have to take them or start introducing new charges to assist reduce their losses.
This is exactly what looks to be happening, Professor Rock stated, "Research demoes that in 2003, none of the cards offering zero per cent APR interest on balance transfers applied charges for transferring balances compared to around 11 per cent that do today."
Perhaps in an attempt to warrant the reduction in 0% introductory time period on credit cards, Saint Patrick Muir, marketing director at Morgan Stanley Consumer Banking, said: "Our research suggests that cardholders are wising up to short-term deals, as the bulk of those currently switching or planning to switch over are not moving from one short-term offer to another.
Only eight per cent of people are looking to change their credit card in the approaching months, said investing bank Morgan Stanley, however Stuart Glendenning advises, "Whilst not all have gone down the fee path yet, my advice is simple: transfer your balance for free while you still can."