Teaser rate
Encyclopedia
A teaser rate is a low, adjustable introductory interest rate
advertised for a loan, credit card, or deposit account
in order to attract potential customers to obtain the service. The teaser rates are normally too good to be true for the long term, and are far below the common realistic rate for the service. In a competitive market, many companies will compete with each other for the lower teaser rate. Typically, the teaser rate is 0%.
The teaser rate is only temporary. After its expiration, the rate increases to a normal or much higher than normal rate, and in some cases, the borrower cannot keep up with making payments.
Some consumers with good credit manage to take advantage of teaser rates offered by the industry as a whole by applying for a card, having their balances transferred to that card, and then maintaining payments on that card during the period of the teaser rate. Prior to its expiration, they obtain another card that they use for the same. They continue this technique continually in an attempt to keep money borrowed at low interest rates. Many credit card issuers who catch onto a consumer using this technique will be reluctant to offer the teaser rate to such consumers
Introductory rate
An introductory rate is an interest rate charged to a customer during the initial stages of a loan. The rate, which can be as low as 0%, is not permanent. It has an expiration after a specified period of time....
advertised for a loan, credit card, or deposit account
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
in order to attract potential customers to obtain the service. The teaser rates are normally too good to be true for the long term, and are far below the common realistic rate for the service. In a competitive market, many companies will compete with each other for the lower teaser rate. Typically, the teaser rate is 0%.
The teaser rate is only temporary. After its expiration, the rate increases to a normal or much higher than normal rate, and in some cases, the borrower cannot keep up with making payments.
Some consumers with good credit manage to take advantage of teaser rates offered by the industry as a whole by applying for a card, having their balances transferred to that card, and then maintaining payments on that card during the period of the teaser rate. Prior to its expiration, they obtain another card that they use for the same. They continue this technique continually in an attempt to keep money borrowed at low interest rates. Many credit card issuers who catch onto a consumer using this technique will be reluctant to offer the teaser rate to such consumers