What do Balance Transfer Offer terms depend on?

So I am looking through my mail today, and I see two balance transfer offers from a single bank, one offer for each credit card account I have open with them. So far, nothing strange – it’s not unusual to get competing offers with different terms from the same company, maybe something like:

  • 1 year fixed 0% APR, then xx% APR
  • 18 months fixed APR, then yy% APR
Where there are trade-offs between various options.
What I found interesting this time is that the two offers were for identical terms, other than the APR – one offering a rate that was 4.75% higher than the other! Now, assuming that the interest rate a bank charges you is a function of your credit-worthiness (how likely are you to pay them back), bank’s hurdle rate (desired ROI), and maybe even your previous relationship pattern (i.e. previous borrowing and repayments). Well, all three should be identical here, since it’s the same customer, lender as well as the relationship history.

What gives?

Interesting to note is that the card offering higher APR is the one I got back in college, when my income was peanuts, and credit score barely existent. On the other hand, I opened the other account more recently, as a working professional with an excellent credit score. I am speculating here, but it seems that the older credit card account is stuck in the “higher risk / more needy of credit / has less choices” customer bucket, while the other is in the “low risk / less needy / more choices” bucket. I am just speculating here, but it sounds like a reasonable explanation..

Another possibility is that it’s some sort of “Predictably Irrational” reasoning in play – where they are throwing in the obviously inferior offer to make the second one look more attractive.

Any thoughts?

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