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Acquiring a card can be exciting, especially when it has an introductory teaser rate that makes sense. Teaser rates can make it seem as if money is being spent without any additional cost or consequences. However, it is best to evaluate each card to see which truly gives you the best deal.
Consumers are able to save a great deal of money on credit when they acquire low interest rates on a credit card. The lowest of these interest rates is the teaser rate. This is the rate that is offered during a credit card's introductory period and it may apply to all of part of the balance on your credit card.
However, the lowest interest rate doesn't always indicate you are going to get the best deal. There are a number of factors to consider when determining exactly how much you can save with these cards. This presents five main questions that should be asked when comparing cards with teaser-rate promotions.
The Length Of The Teaser Rate
Teaser rates are ideal when freeing up money to pay off the balances of other credit cards. In other words, you can transfer a balance from a higher interest card to the lower interest card so that you can save money on interest. However, you want to see when the introductory period ends because it is possible it could end before the outstanding amount is paid in full. Cardholders can then face financing charges that are much higher. You should make note of the credit card's teaser rate termination date so you can work to eliminate the balance by that time. That will keep any remaining balance from being subject to the higher interest rate.
You will find when looking at the teaser rates of different cards that the introductory periods can vary. For instance, one card can offer a zero-interest period of 10 months, while another may offer a period of 12 to 15 months. After the introductory period expires, the cards regular APR could be anything with some of the most common rates being anywhere from 19.99 percent to 24.9 percent.
Then there are cards that simply offer a teaser rate that is a low interest rate. For example, a card may have a teaser rate of 5.99 percent that lasts three years. After the three years, the card could have a variable interest rate that is charged in addition to the prime rate of the time period and an additional percentage. This is why it is very important to read the card terms.
If you do pay off your balance before the expiration date, the average amount of savings averages at least $500. Keep in mind that a shorter introductory period increases the chance that the balance will not be paid off before the period ends.
The APR After Expiration
If you have any doubt that you cannot eliminate the balance before the teaser rate period is over, you should be mindful of the APR that applies. There may also be different rates on different types of transactions. For example, the interest rate may be one thing for purchases, but it could be completely different for balance transfer. There could be a different teaser rate for both, just as the regular interest rate could be different. The regular purchase interest rate could be 19.99 percent with the balance transfer rate being 24.99 percent.
Just because you receive an offer to take advantage of a teaser rate, it doesn't mean that you may qualify. The interest rate that you receive depends on your earnings and credit history. Credit card companies will also assess a higher APR to a card if the credit score does not meet their requirements. This means that you may be shopping for a card with an introductory rate, apply for the card, be approved for the card, and then receive it to find that you do not get the rate because your credit didn't meet the issuer's standards.
Even if you are a candidate for a low teaser rate, make sure you check for the time limit. For example, a card may have a .99 percent offer, but the rate may only apply to accounts that are opened by a certain date. If the application date is missed, then the regular APR will apply.
What Transactions Apply?
As mentioned earlier, there are times when teaser rates only apply to certain transactions or there may be a different teaser rate for the different transaction types. There are some cards that restrict their teaser rates to balance transfers, while others restrict them to purchases. Then there are those cards that have teaser rates for every type of transaction to encourage cardholders to use the card.
The Fees Compared To Rate
Before signing up for a card with a teaser rate, you should familiarize yourself with the credit card fees. Just because a card has a great teaser rate doesn't mean that it won't have high fees to compensate. You should look at everything from cash advance fees to late payment charges.
If you apply for a card that has a teaser rate that is exclusive to balance transfers, you need to do the math to make sure you are getting the best deal. For example, the card has a 3 percent balance transfer fee. You can add that three percent to the 4.99 percent teaser rate. This will make the annual percentage rate 7.99 percent during the first year.
If a card waives the balance transfer fee during the introductory period, the card could have an annual fee. You will have to do a little bit of math to see how that will save you on the balance transfer and which card is going to give you the best deal.
With some organization, discipline, and some thinking so you can ask the right questions, you can maximize everything that a credit card is designed to give you. When it comes to the teaser rate, you can capitalize on that rate, especially when doing balance transfers.