What are “Teaser Rates” on a Credit Card?

“Teaser rates” (also known as “introductory rates” and “promotional rates”) are just that: low annual percentage rates (APRs) that are used to entice people to apply for a certain credit card. Unfortunately, these rates may not last long.

Most teaser rates expire and revert to a higher rate after six to 12 months. Specific policies are set by a credit card issuer. As a result of the 2009 CARD Act, teaser rates must be in effect for at least six …

How do credit card companies determine the balance on which interest is charged?

Over the years, credit card companies have developed several different methods for computing the balance on which credit card finance charges are calculated. Federal law requires creditors to state the Annual Percentage Rate (APR) when referring to interest and the method used to compute the unpaid balance on which interest is charged.

Below is a description of some methods for calculating the unpaid balance on a credit card and how different calculations affect finance charges. These calculations were made by …

What is a penalty APR on a credit card?

Penalty annual percentage rates (APRs) are high interest rates that can be triggered by the slightest infraction such as just one payment that is received a day late. Often these APRs range from 20% to 35%. Lenders increase borrowers’ interest rate significantly and profit from their mistakes.

As a result of the Credit CARD Act, the only way a credit card company can apply a Penalty APR to an existing balance (i.e. purchases you have already made) is if you …