Most of the financial companies lure customers by announcing their introductory offers or “teaser rates”. These introductory offers attract people to sign up for products of their companies.
For example, rates on loan might start low but it has a habit to rise over a period of time. If you don’t switch over, you may end up paying more than the odds.
The credit cards, savings account, mortgages and motor insurance policies use the teaser rates. But the fact is you can turn these offers to your advantage provided you keep your intellects in place.
Tricks You Need To Do For Cashing On The Introductory Offers:
1. Credit cards: Most of the credit card issuers use some of the highest profile teaser rates in form of zero percent introductory rates for credit cards. Some of the cards charge to zero percent for 30 months and there are others which charge zero percent to 18 months.
Although it sounds amazing deals, here’s the catch you should clear your full balance before the end of the introductory rates. If you don’t clear it, you can expect an annual percentage rate (APR) payment of 18.9%.
The fact is that about two-thirds of people fail to switch their card before the end of the introductory rate and most of them fail to pay their debt.
According to the stats from RBS/NatWest, the average zero percent balance transfer credit card holder has £9,000 debt on multiple cards. Moray McDonald, the interim head of products and marketing at RBS/NatWest said that some borrowers are stuck to pay APRs of more than 20%.
Hence, the industry is dominated by the teaser rates which trap down people into debt.
RBS/NatWest has launched a Cleaner card called the new Clear Rate Platinum credit card which charges a single rate of 6.9% for transferring the balances and new purchases. Additionally, it also gives an upfront of £24 in a year.
Personal finance expert, Andrew Hagger agrees that zero percent introductory cards could really have a nasty sting. He says to use the teaser rates to your advantages so that it become a great method to save interest and take charge of your debt.
Barclaycard Platinum deals the longest balance-transfer rate at 31 months. The transfer fee is £134.50 to transfer a £5,000 balance which is about 2.69%.
On the other hand, Nationwide offers low balance transfer of 0.75% with a zero percent rate. This rate lasts for a slight short term of about 26 months.
If you wish a low introductory purchase, you can opt for Santander and Tesco which offers cards with zero percent for a period of 18 months.
However, if you don’t believe yourself with zero percent cards then shop for a long-term but low APR card.
Hagger adds that Tesco offers a Clubcard credit card having low APR about 7.8% while Sainsbury’s Nectar credit card has 6.9%.
These introductory offers and rates are long-term ones which are available only for people having clean credit card records.
The issuers offer their best rate to 51% for the successful applicants while the rest may be charged higher, offered worse terms and conditions or even rejected.
Real tease is all it needs to rock the bottom saving rates look sexy, but building societies and banks have given it a good shot.
They entice people by introducing bonus which runs for about 12 months. After this period, you’ll get a lot less money compared to what you’ve given.
Sometimes, the bonus takes up the entire rate on account. This could affect the unwary savers as they could find themselves trapped in the zombie accounts for many years.
Consider this example; the post office online saver pays 1.30% which is a market-leading rate. But this headline rate also includes a bonus of about 0.4% which expires after a period of 12 months. After this time you get only 0.9%.
The Tesco Bank’s Internet Saver pays 1.30% but the bonus is 0.55%. AA’s Internet Extra is 1.30% rate with hefty bonus of 0.8%. Both the offers end after a period of 12 months.
Previous year, the financial conduct authority said that it checked the introductory rates and dubbed them as the financial equivalent to the “Venus flytrap”.
The specialist at the consumer intelligence, David Black advises people to be proactive by checking the best deals. He also suggests people to switch funds to a new account when the bonus ends.
Some of the cash individual savings accounts (Isas) offer rewards to savers. If you have current account in HBSC, then the loyalty cash Isa provides you loyalty pay rate of 1.6% each year provided you pay at least £1.
Mortgage lenders also hope for the big tease by introducing incentives like discounted or tracker, fixed rate. David Hollingworth says that when this ends, these deals revert to a higher standard variable rate (SVR). It is therefore very important to know when the initial rate actually ends.
Sometimes, the leap can be huge than the previous situation. Leeds building Society offers new discount rate of £999 for two years charging 1.70% to 60% loan to value (LTV). When this ends, you revert to its SVR which is currently a whopping 5.69%.
On the other hand, Chelsea Building Society has a two-year fixed at 1.64% to 65% LTV. The society charges a fee of £1,675 which ends in April 2016 and you revert to 5.65%.
If you’re organized it’s easy to avoid a rate shock. Most deals do not have early repayment charges, so once the initial incentive ends you can switch the deals. Always make plans a few months before the deal ends so that you’re ready to switch.
Even paying SVR for a month or two could erase your complete savings you made with the initial deal.
If you don’t wish to switch every two years, you could better opt for a long term fix. However, the downside to this is you’ll have to pay an early repayment charge for switching accounts. It is better to try a lifetime tracker rate so that you are free to move any time.