26 August 2008

It's Not Nice to Tease

I hate teaser rates.

Don't get me wrong, I understand why financial institutions use teaser rates. After all, getting new customers/members in the door is immensely easier when you can boast 0.9% APR car loans or 10% APY certificates. Truth be told, I have taken advantage of at least two credit card offers that promised a 0% APR intro rate for 12-18 months. For the responsible, intelligent consumer these teaser/intro offers can be great deals. Let's be honest, though, these companies don't offer teaser rates to be nice. And they surely expect to make money off of the deal.

What does that mean to most consumers? At least one of three things: 1) Deep in the 45 lines of fine print there is a "GOTCHA" line (assuming you can decipher the legalese) that explains how the deal will make your financial institution very wealthy; 2) The CMO behind the offer understands that most people receiving the offer will be either too irresponsible or too lazy to take full advantage of it; or 3) The deal you THINK you're getting is likely a far cry from what you are actually getting in the long run.

The message that your company is willing to deceive people to get their business is bad enough. But something I received in the mail yesterday has convinced me that teaser rates are wrong for yet another reason.

Sallie Mae sent me a letter to tell me that they lowered my interest rate on student loans to 3.010% APR because I have made 48 consecutive on-time payments. A reverse teaser rate? What a concept! Instead of raising my price over time because I'm hooked into a contract, Sallie Mae lowers my rate because I am paying as agreed. I scratch their back, they scratch mine.

Financial institutions, take note. Want a relationship with me? Want loyalty? Then don't give me your best deal up front. Instead, reward me through time for being a good customer/member. Offer a good rate up front, and promise your audience that the deal only gets better through time.

Want transience? Want disloyalty? Keep proving to me that my first impression was as good as it's going to get.

Will you be able to sell this to everyone? Maybe not. But you won't find yourself wondering why you can't retain your membership/customer base when your competitor down the road comes out with his latest/greatest teaser rate.


Andy said...

Awesome post man. I love this idea. It is so true that teaser rates do nothing to bring in long term members. Once the "gotcha" clause kicks in that first impression is shattered. How is that a rewarding experience for the member?

I wonder if Sally Mae has seen a decrease in delinquency rates by using this tactic?

Anonymous said...


Great post and so timely as credit unions continue to use bribes to drive in members.

I hated teaser rates for the very reason you're pointing out. To loyal long-time members it appears the credit union cares more about an anonymous person (anyone who lives, works, or worships in blah blah blah) then the teachers, postal workers, church goers, government employees, military, etc. that FOUNDED the credit union.

Insted of "no payments for 90 days" how about your last car payment is on us because you made 47 of them on time! Here's your title! Congratulations - you OWN your car.

That's promoting thrift and responsible credit and getting the American economy out of the crapper.


Winter Prosapio said...

I agree, great post!

Would dividends fall in that same category? How many CUs still pay them out?

anne said...

nice post thanx for sharing this..