Credit Card Teaser Rate
What Is a Credit Card Teaser Rate?
A credit card teaser rate is a promotion wherein a credit card issuer briefly offers a below-normal annual percentage rate (APR) on their cards. Through these programs, credit card companies hope to attract new cardholders and to urge existing cardholders to transfer their credit card balances from contending issuers.
How Credit Card Teaser Rates Work
Credit card teaser rates are commonly highlighted as part of the advertising efforts of credit card companies. Under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, credit card teaser rates are required to last for no less than six months. In practice, most issuers will more often than not offer such promotions for between six months and one year, despite the fact that they sporadically stretch for up to two years.
While determining what credit card teaser rates to offer, credit card companies weigh various factors. These incorporate economic contemplations, for example, the overall state of the business cycle, as well as factors concerning the creditworthiness of the individual borrower. Generally talking, teaser rates will quite often be more normal and more liberal when the economy is getting along admirably, as credit card companies rival each other to attract new business. Alternately, teaser rates become more uncommon during periods of economic hardship, for example, during the 2007-2008 Financial Crisis.
Despite the fact that credit card teaser rates can be an attractive approach to briefly borrow at low costs, consumers must try not to spend beyond what they can repay. While credit card teaser rates can be attractive to consumers shopping for new credit cards, teaser rates can rapidly land a consumer into hot water. Consumers who receive a teaser rate on another card must be careful to not let the low rate influence them to go with poor spending decisions. Any other way, they could end up with an unsustainable debt burden that they can't bear to repay or service once the early on teaser rate has expired.
True Example of a Credit Card Teaser Rate
Taylor is shopping for another credit card and is anxious to pay as little interest as could really be expected. At the hour of their pursuit, the economy is doing well overall, making credit card companies offer liberal teaser rates to attract new business.
Subsequent to looking at different options, Taylor finds a credit card offering 0% interest for the initial 12 months. To exploit this briefly cheap credit, Taylor expands their spending, utilizing the card to purchase several consumer things they normally couldn't manage.
Albeit this offer appears to be attractive in the short term, it could leave Taylor in an entirely vulnerable financial position. Except if they are able to repay the outstanding credit card debt before the finish of the starting period, they might be unable to service that debt once the card's normal interest rate happen.
Features
- Consumers must be careful to not blame the teaser rate so as to bring about additional debts than they can in any case manage.
- They normally last for somewhere in the range of 6 and 12 months and are most common when the economy is.
- A credit card teaser rate is a promotional program wherein the interest rate on the credit card is briefly decreased.
