If you want to pay off your credit card debt cheaply, it’s essential you avoid interest like the plague.
The best way to do this is by becoming a rate tart. If you’ve not heard of it before, ‘rate tarting’ is the practice of switching between the various short term 0% balance transfer credit cards on the market until your debt is cleared.
And while the term may not be particularly complimentary, there’s no doubting that rate tarts save themselves a fortune – especially considering the average credit card now charges interest at well over 17%*.
Need to be diligent
Of course there is no reward without effort. Not only do you have be vigilant in remembering to apply for and switch cards on time, but you also need to maintain an excellent credit rating (read more about this here) throughout the process in order to gain access to the best deals.
Whether it’s buying a house or losing your job, there are a number of factors that could hurt your credit rating down the road.
Choose a realistic strategy
The practice of rate tarting has been complicated somewhat by the emergence of balance transfer fees (read more about these here).
These cost in the region of 2-3%, but thankfully not all credit cards charge them. The downside of such fee-free balance transfer deals is that they tend to offer a far shorter 0% window than the fee-charging varieties.
This means there are essentially two different approaches you can take to rate tarting: Either (a) switch between cards with the cheapest fee - and thus be prepared to switch more often - or (b) simply choose the cards with the longest interest-free offer, regardless of the fee. The latter will no doubt be easier, but it will also be more expensive.
Now get tarting
If you are going to opt for the cheapest possible strategy, start by working your way through the various short term, fee free balance transfer cards on the market, such as the Abbey Zero card (0% interest for six months) and the Britannia Building Society Classic card (0% / 5 months). There aren’t too many of these on the market, but you should be able to find them by checking best buy tables and price comparison site.
For those who want to take the slightly easier strategy, there are currently two credit cards that charge no interest on transfers for 15 months: the Virgin credit card (2.98% fee), and the Capital One Platinum Balance Transfer card (3%). After you’ve used these, use the Internet to search the market for the best deal available at that time.
*Information correct at time of publishing (30/07/2008)
