Rate Tart

DEFINITION of 'Rate Tart'

Credit card users who transfer balances from one card to another in order to obtain the lowest possible interest rate. Rate tarts typically make balance transfers when a special interest rate on a credit card balance – often as low as zero percent – is about to run out. As credit card issuers generally offer low interest rates for limited periods of time ranging from six months to one year, rate tarts may have to transfer balances between credit cards at least once or twice a year. The somewhat derogatory term “rate tart” is believed to have originated in the United Kingdom.


Rate tarts can be regarded as engaging in a game of financial musical chairs. A rate tart can stay in the game as long as he or she can find a low-interest card to which credit card balances can be transferred, but the game’s up once they are unable to do so, at which point they have to face the music.

Although this is a financially risky strategy, the punitive interest rates charged by most credit card issuers make the strategy pursued by rate tarts one worth considering for consumers with a high level of credit card debt. While many institutions levy a transaction fee that can range from 1% to 5% of the transferred amount, the cost savings from lower interest expense can be substantial, even after accounting for the fee. A credit card balance of $5,000 carried for a year at a 15% rate of interest would result in interest expense of $750. But a zero percent transfer offer with a 2% fee would only cost the consumer $100, resulting in a savings of $650.

The practice of frequently transferring credit card debt may affect the credit scores of rate tarts, especially if balance transfers result in credit cards getting close to their credit limits.