Reviewed by Sep 30, 2020| Updated on
Upfront pricing is the interest rates and limits applicable to a borrower as specified in a credit card's underwriting at the time of issuance. The credit card underwriting uses automated technology to analyse and lay down the terms related to pricing when a new customer relationship begins.
A credit card company uses customised risk-based pricing methodologies to set upfront pricing. It considers a borrower's credit profile and debt-to-income ratio to draw conclusions about pricing terms upfront for the credit agreement.
The risk-based pricing method is historically being used in the credit market to establish all types of pricing with respect to many types of loan products.
Credit card companies use a modified version of risk-based pricing methodology to settle with the terms generated through underwriting systems that analyse information from a credit card borrower's credit application. Credit card pricing is generated instantly when an application is submitted with terms provided to a borrower in real-time.