Credit Card Fixed Rate

Credit cards can look like the best friend and the worst enemy of a consumer. They help with cash flow and allow big purchases. Then the bill comes and the reality of fees and interest rates outweighs the convenience of purchasing on credit.

A recent trend in the market combined with new laws forcing credit card companies to reveal all charges and summarize fees, has caused consumers to look for options. Some consumers think choosing a credit card with a fixed rate will resolve roller coaster interest charges. That might be a temporary solution.

What many consumers fail to understand is the lack of existence of a credit card with an actual fixed rate. A credit card fixed rate might exist for introductory terms on a new account. A credit card fixed rate might exist when a consumer consolidates bills or refinances a balance. Those below normal fixed interest rates might continue for an extended time period. Fixed rates appear to be fixed rates. In reality, they are not.

Switching to a credit card fixed rate sounds like a good idea. It should save some money short term. Eventually, increases and the same practices a credit card company employs to keep up with their added expenses will affect all credit card holders. Whether your card has a fixed interest rate or a variable interest rate will not matter. Interest rates will change. Why? Because credit card companies have the right to change it. It is within their rights to tell their customers a fixed rate is changed to a higher fixed rate. They can simply notify holders that rates will be increasing. That can happen with only 15 days notice.

In support of a credit card fixed rate versus a credit card with a variable rate, the fixed rate won’t climb as quickly or fluctuate as much as the variable rate. The variable rate is tied to an index (the prime rate) and will go up and down according to that index. That shift can be extreme or minimal depending on the market and interest rates as well as other influences.

The bottom line for consumers and credit cards is fairly simple. If you have to use a credit card and cannot pay off the balance each month, a fixed rate card is a better choice than a variable rate credit card. Consumers should work on becoming better informed about credit card laws and interest rates.