What Is a Credit Card Teaser Rate?

A credit card teaser rate is a promotion in which a credit card issuer temporarily offers a below-average annual percentage rate (APR) on their cards. Through these programs, credit card companies hope to attract new cardholders and to encourage existing cardholders to transfer their credit card balances from competing issuers.

Key Takeaways

  • A credit card teaser rate is a promotional program in which the interest rate on the credit card is temporarily reduced.
  • They typically last for between 6 and 12 months and are most common when the economy is strong.
  • Consumers must be careful to not use the teaser rate as an excuse to incur more debts than they can otherwise afford.

How Credit Card Teaser Rates Work

Credit card teaser rates are commonly featured as part of the advertising campaigns 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 at least six months. In practice, most issuers tend to offer such promotions for between six months and one year, although they occasionally stretch for as long as two years.

When determining what credit card teaser rates to offer, credit card companies weigh many different factors. These include economic considerations, such as the overall state of the business cycle, as well as factors concerning the creditworthiness of the individual borrower. Generally speaking, teaser rates tend to be more common and more generous when the economy is doing well, as credit card companies compete with one another to attract new business. Conversely, teaser rates become less common during periods of economic hardship, such as during the 2007-2008 Financial Crisis.

Although credit card teaser rates can be an attractive way to temporarily borrow at low costs, consumers must avoid spending more than they can repay. While credit card teaser rates can be attractive to consumers shopping for new credit cards, teaser rates can quickly land a consumer into hot water. 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. Otherwise, they might find themselves with an unsustainable debt burden that they cannot afford to repay or service once the introductory teaser rate has expired.

Real-World Example of a Credit Card Teaser Rate

Taylor is shopping for a new credit card and is eager to pay as little interest as possible. At the time of their search, the economy is doing very well, causing credit card companies to offer generous teaser rates in order to attract new business.

After comparing various options, Taylor finds a credit card offering 0% interest for the first 12 months. To take advantage of this temporarily cheap credit, Taylor increases their spending, using the card to purchase several consumer items they normally could not afford. 

Although this offer seems attractive in the short term, it could leave Taylor in a very vulnerable financial position. Unless they are able to repay the outstanding credit card debt before the end of the introductory period, they may be unable to service that debt once the card's normal interest rate comes into effect.