Fixed rate credit cards are not as flashy as variable rate cards that offer lengthy 0% introductory interest rates. However, the truth for most consumers is that fixed rate cards, especially those with low interest rates, are much more useful that cards that boast 0% offers. This is because the 0% rate is temporary, and the APR can skyrocket to 15% or 20% or even more after the introductory period expires. If you have any remaining balance on the card after the introductory period ends, it will be subject to these sky high interest rates. A fixed rate card, as its name suggests, does not have these interest rate spikes, so there is no need to worry about spending and paying-off balances within a set time frame.
With fixed rate cards, it is easy to always figure out how much interest is due. Most cards use a variable rate that can change from month to month and change significantly over longer periods of time. It can be easier to figure out exactly how much the interest payments will be with a fixed rate card, even if you are paying off the balance over time. For this reason, getting a fixed rate card to consolidate your debt is advantageous. You’ll know exactly how long it will take to pay off a balance without having to worry about changing rates. When the economy is unstable, as it has been for the past few years, fixed rate cards are the obvious choice because adjustable rate cards fluctuate the most during times of economic uncertainty.
People who normally have an outstanding balance on their credit card can get help from fixed rate cards because they can plan their repayments far into the future. Most fixed rate cards currently on the market have a rate of between 8% and 10%. That doesn’t sound as attractive as a 0% offer that last for more than 12 months, but it certainly is better than the 15%-20% that most 0% card jump up to after the honeymoon period.
But are fixed rate cards really “fixed?” That, unfortunately, depends on the fine print. Some cards can actually change a “fixed” rate if they give cardholders advanced notice. For some cards, this advanced notice is only a few days. These are not true fixed rate cards. Before you sign up for a fixed rate card, check to see what the card’s policy is for changing its rates. Though most have some sort of a clause that allows them to change the rate, the amount that they can change it and the time that they have to notify you can be very different from card to card.
If you want a true “fixed” rate that you are certain will never change, you might be better off getting an unsecured loan, either from your bank or from a peer-to-peer lending site like Lending Club. From these sources, you can get a loan that will be locked in for its entire lifetime. If you can get a rate that is around 8%-10% (or less), then this is a good option for paying down credit card debt.
Getting a fixed rate card generally requires a good credit score, so this is not an option for people who already have racked up credit card debt and damaged their credit score. Since it has become harder and harder to get unsecured loans, responsible card users may find that a fixed rate card is a good option for paying off their credit card debt or making major purchases. Though, fixed rate cards are not truly “fixed,” they are not likely to fluctuate as much as variable rate cards.