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An introductory rate (also known as a teaser rate) is an interest rate charged to a customer during the initial stages of a loan. The rate, which can be as low as 0%, is not permanent and after it expires a higher rate will apply.The complete idiot's guide to managing your money By Robert K. Heady, Christy Heady, Hugo Ottolenghi, p. 235 [1]
The purpose of the introductory rate is to market the loan to customers and to seem attractive. They are commonly used for the application of , and they may or may not apply to .Truth in lending By Ralph J. Rohner, Frederick H. Miller, Robert A. Cook, Alvin C. Harrell, Elizabeth Huber, American Bar Association. Section of Business Law, page 510 [2]
In the United States, the Fair Credit and Charge Card Disclosure Act (FCCCDA) requires that the rate that will occur following the expiration of the introductory rate be clearly disclosed to the customer.
The teaser rate is only temporary. After its expiration, the rate increases and in some cases, the borrower cannot keep up with making payments at the higher post-teaser rate.
Some consumers with good credit manage to take advantage of teaser rates by applying for a card, having their balances transferred to that card, and then maintaining payments on that card during the period of the teaser rate. Prior to its expiration, they obtain another card that they use for the same. They continue this technique continually in an attempt to keep money borrowed at low interest rates. Many credit card issuers who catch onto a consumer using this technique will be reluctant to offer the teaser rate to such consumers.
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