Credit Card Teaser Rate

Definition of 'Credit Card Teaser Rate'


A lower-than-normal interest rate that a credit card company extends to a new cardholder for a fixed period. Credit card teaser rates are a tool for attracting new customers. The best possible teaser rate is 0%, but any rate below the card issuer’s usual rate could be considered a teaser rate. Under the 2009 CARD Act, teaser rates must last a minimum of six months; creditors might offer them for periods as long as 24 months.

Investopedia explains 'Credit Card Teaser Rate'


The availability of teaser rates is influenced by economic conditions, the rates credit card companies pay to borrow and consumers’ creditworthiness. Teaser rates tend to be more available when the economy is doing well, borrowing costs are low and consumers are paying their bills on time. For example, teaser rates became less common during the Great Recession in 2008, but creditors began offering them again as conditions improved.

Consumers who receive a teaser rate on a new card must be careful to not let the low rate influence them to make poor spending choices. A consumer who uses a 0% teaser rate as a rationale for not paying his credit card balance in full each month might find himself with a balance so large that he can’t pay it in full at the end of the introductory period. He might have made those purchases with the idea that he would not pay any interest on them. Instead, after the teaser rate expires, he will end up paying off the balance at a much higher interest rate, perhaps between 10% and 26% depending on economic conditions and the borrower’s credit score. This is the very scenario that gives credit card companies an opportunity to make back the money they lost in charging a low introductory rate.



comments powered by Disqus
Hot Definitions
  1. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  2. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  3. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  4. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  5. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  6. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
Trading Center