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Upfront Pricing

Reviewed by Apoorva | Updated on Sep 30, 2020

Catalogue

Introduction

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.

What is Upfront Pricing?

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.

More About Upfront Pricing

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.

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