Bait And Switch

A A A

DEFINITION

A dishonest marketing tactic in which a marketer advertises a very attractive price/rate/term that is really a teaser rate meant to attract customers. Once the customer comes into the store/office to inquire about the advertised price/rate (the "bait"), the advertiser will attempt to sell the customer a more expensive product (the "switch").


INVESTOPEDIA EXPLAINS

The bait and switch tactic has gained notoriety in the mortgage market as an unscrupulous marketing tactic meant to drive business. In a mortgage bait and switch an agent or company will post exceedingly low mortgage rates, knowing full well that the vast majority of applicants will be unable to qualify for these teaser rates. Once customers begin to come into the office to inquire about the low rate, the agent will proceed to offer them the higher rates they are more likely to qualify for, thus earning greater commission.


RELATED TERMS
  1. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding balance ...
  2. House Poor

    A situation that describes a person who spends a large proportion of his or ...
  3. Teaser Rate

    An initial rate on an adjustable-rate mortgage (ARM). This rate will typically ...
  4. Initial Interest Rate

    The interest rate that is initially assessed on an adjustable-rate mortgage ...
  5. Big Data

    The growth in the volume of structured and unstructured data, the speed at which ...
  6. Social Media Marketing (SMM)

    The use of social media websites and social networks to market a company’s products ...
  7. Social Media Optimization (SMO)

    The use of social media networks to develop and manage an organization’s message. ...
  8. Forbearance

    A temporary postponement of mortgage payments.
  9. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes the monthly loan ...
  10. USDA Non-Streamlined Refinancing

    A mortgage-refinancing option offered by the United States Department of Agriculture ...
Related Articles
  1. Mortgages: Fixed-Rate Versus Adjustable-Rate
    Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

  2. To Rent Or Buy? The Financial Issues
    Home & Auto

    To Rent Or Buy? The Financial Issues

  3. Top Tips For First-Time Home Buyers
    Home & Auto

    Top Tips For First-Time Home Buyers

  4. 6 Questions To Ask Before You Refinance
    Home & Auto

    6 Questions To Ask Before You Refinance

  5. When (And When Not) To Refinance Your ...
    Home & Auto

    When (And When Not) To Refinance Your ...

  6. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  7. The Power Of Branding
    Entrepreneurship

    The Power Of Branding

  8. 5 Tips For Recession House Hunters
    Home & Auto

    5 Tips For Recession House Hunters

  9. Why It’s So Hard to Get Small Mortgage ...
    Credit & Loans

    Why It’s So Hard to Get Small Mortgage ...

  10. Top Reasons To Apply For An FHA Loan
    Credit & Loans

    Top Reasons To Apply For An FHA Loan

comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center