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Low interest rates can be very enticing when applying for a new credit card. In the minds of many applicants, they want to be able to use the card as much as possible during that period, especially if there are rewards to be had.
When it comes to these teaser rates, what is so enticing is when the teaser rate is 0 percent APR for a specific number of months on a portion of the balance or all of it. Many times it is the introductory rate that helps a person decide whether or not to sign up for a card. The second factor that is looked at is how long the teaser rate will be in effect.
Despite the exact rate and how long it is going to be in effect, it is important to know that these teaser rates are not always a sign that a deal is a good deal. There are several components that must be looked at first so you know whether or not you are truly saving any cash. Failing to compare before making a commitment can become very costly in the long-term.
Teaser Rate Qualification
Receiving a teaser rate does not guarantee approval. Even if you are approved, it does not always guarantee that you are approved for the teaser APR. Applicant earnings and credit history have a lot to do with whether or not a person receives the teaser rate. Credit card companies also have the ability to assess a higher APR than what a person may initially believe they will receive because their credit rating may be poor. The poorer the rating, the higher the APR will be if approved.
Even if you are the ideal candidate for a teaser rate, it is important to know what the time limit is to apply for a card with a teaser rate. For instance, a .99 percent introductory APR will only be available on new accounts opened within a specific time period. If the teaser rate expires in July, then the card must be applied for before July to get that rate. If the teaser rate application period has passed, the regular APR is in effect.
Teaser Rate Duration
The first aspect to look at is the duration of the teaser rate. The rate should be one that allows the money paid to reduce the balance more. If the teaser rate ends and there is still a balance on the card, then the cardholder faces high finance charges. For this reason, it is a must to make note of the teaser rate's expiration date. This is so you know when the balance needs to paid off by or the entire balance is subject to the new, permanent interest rate.
The duration of the teaser rate is also going to be an important part of deciding which credit card is the best card. However, looking at what the rate will be after the introductory period is over is equally important. The reason is because the regular rate may cost a lot in the long-term. For instance, a card with a teaser rate of 5.99 percent for three years can save a lot more money than a card with an introductory rate of 0 percent for a year.
Teaser Rate Transactions
There are some transactions that teaser rates apply to and some that they don't apply to. For instance, the rate may apply to purchases and balance transfers but not cash advances. There are many times that teaser rates are good for purchases only. Knowing what the rate applies to gives you the knowledge you need when choosing a card and also lets you know what to expect when using the card. That way there are no unexpected surprises.
It also helps to know what the rates are for specific transactions so that you can always ensure you are getting the correct rate. Errors on billing statements can become costly. If there is an error, you can bring it to the attention of the credit card company and have it rectified so that you are not paying for the mistake.
Post Teaser Rate APR And Fees
Individuals that suspect they will be unable to pay off their balances before the teaser rate runs out need to be aware of what the APR will be after the teaser rate expires. This is what truly determines whether or not a card is a good deal. If there is a 0 percent APR teaser rate, but the rate increases to 29 percent after the introductory period, it may not be as good a deal as a card with a 2.99 percent introductory rate and a 19 percent regular rate.
The fees are also something to consider, as the fees are typically assessed when the account is opened. These fees can make it difficult to pay off a balance before the teaser rate expires. Look at maintenance fees and annual fees. When it comes to late fees, you have more control over how high your fees go because making an on-time payment can avoid these fees.
Other fees that can't be avoided in many cases are balance transfer fees, cash advance fees, and foreign transaction fees. When shopping for a card, consider what you will be doing the most with that card. If the sole purpose is to transfer the balance of another card to a card with a lower rate, do the math. If there is a 3 percent fee in addition to a 5.99 teaser rate, then the APR for that transfer is going to be 8.99 percent during the teaser rate period.
All in all, it is very important to look at the teaser rate, the length of the teaser rate, any initial and monthly fees, and the fees and rates for balance transfers and other transaction types on the card. When you take these factors and compare different cards, you can find the right one for you.