What is a Teaser Rate?
Teaser rates are short-term or introductory rates that are used to attract the attention of consumers and generate new business for ongoing financial services. Generally, a teaser rate is only in effect for a short period of time. After the duration of the teaser rate has expired, this introductory rate is withdrawn and a more permanent and often higher rate goes into effect. In most cases, a teaser rate will be quite attractive to the prospective customer. The rate is usually less than the current market rate for comparable services, which helps to grab the attention of consumers. Along with the introductory rate, the provider also quotes the rate structure that will be in place once the short-term teaser rate expires. Unfortunately, many consumers tend to overlook this data until the expiration takes place, and find themselves saddled with a rate that is above current market standards. The concept of a teaser rate is a common incentive with credit card offers. For example, a credit c
A teaser rate is a short-term, below-market interest rate offered to attract customers to sign-up for, or switch to a certain credit card. It may also be referred to as an introductory rate. Be careful to make sure that switching does not end up costing more in the long run. Balance transfer fees and minimum transfer fees could make your transaction expensive.
Most ARMs have a low beginning interest rate. This is usually only a teaser, a come-on to get you to sign up for the ARM. Often the teaser is several percentage points below the true rate. What this means is that in the first few adjustment periods, your effective interest rate will rise even if interest rates in general do not! As an example, the discounted teaser rate may be 4 percent and the true market rate may be 7. You get the ARM at 4 percent. However, if it has 3-month adjustment periods with a maximum adjustment of 1 percent in interest each period, within 9 months it will be up to 7 percent. Your interest rate will go up 1 percent the first 3- month period, 1 percent the second 3-month period, and 1 percent the third 3-month period, so that 9 months after you get the loan you are paying 7 percent instead of 4. Additionally, some of these loans are written in such a way that the interest rate will continue on up to make up for the below-market interest rate you received as par
