What is a "Teaser Rate" on Foreign Exchange (FX)?

Financial institutions offer highly competitive teaser rates to attract prospective new corporate FX clients. Banks may even process the first few FX trades with no profit margin in order to win new business.

Caveat Emptor - However, over time that competitive teaser rate will fade and more costly rates of exchange will come into play. Those less competitive exchange rates make it more expensive for a company to buy or sell FX - which in turn erodes the companies' profit margins. And, even worse, FX rates often get worse and worse unless a company pays close attention. Example, a teaser rate is offered of 0.4%. Then increases to 0.6%, then 0.85%, then 1.0%, then 1.6%. In no time the FX cost has quadrupled. The increases will happen over time which may be a few weeks, or a a few months or maybe even a year.

KEY POINT: Banks move away from their initial teaser FX rates so they can increase their profit.

It is possible to retain the teaser rate. DM me if you'd like to learn how to secure those competitive initial FX rates to keep your costs low and profit margins high on an ongoing basis.