Upfront Pricing

Reviewed by Apoorva | Updated on Sep 28, 2020

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.

Related Terms

  • Employee Provident Fund

    The Employee Provident Fund (EPF) is a retirement benefits scheme in which employees of an organisation contribute a small portion of their basic pay monthly.   Read more


  • Cost of Funds

    The cost of funds is the interest rate that financial institutions are paying on the funds they use in their business.   Read more


  • Dormant Account

    If you have a savings or current account and if you have not made any transactions for more than 12 months through it, the account will be listed as an inactive account.   Read more


  • Consumption Smoothing

    Consumption smoothing refers to a process of achieving a balance between spending for today's needs and saving for the future.   Read more


  • Showrooming

    Showrooming refers to the practice of checking out a product in a retail store before buying it from online retailers.   Read more


  • Savings

    Savings represents an individual’s unspent earnings.   Read more


Recent Terms

  • Target Risk

    Target risk assets are a class of assets that are not covered under the coverage of a reinsurance treaty or insurance policy because of a particular risk they possess.   Read more