Fixed Rate Credit Cards
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Variable Vs. Fixed Rate Credit Cards: Understand The Difference
Many credit cards come with special introductory rates. These often include low or 0% interest rates for the first months or year. But what happens after the introductory period? This is when most credit cards switch to a variable or fixed interest rate. Read on to learn the difference between variable and fixed rate credit cards.
Variable Rate Credit Cards
Variable interest rates are usually tied to another rate. Many credit card companies use the Prime lending rate as an index. This is the rate at which top banks in the United States can borrow money from the Federal Reserve. Creditors also may calculate variable interest rates based on the Treasury bill.
Fixed Rate Credit Cards
The credit card lender adds a number of percentage points, known as the margin, to the index rate. This new rate is then passed on to your credit card. In certain cases, the credit card company may first multiply the index rate by another number, called the multiple. The new figure is added to the margin to determine the credit card interest rate.
As the index rate fluctuates, it affects the rate on your credit card. The APR (annual percentage rate) on variable rate credit cards may change at any time. These cards often include a “floor rate.” This is the lowest interest rate that can be offered.
Fixed Rate Credit Cards
Fixed Rate Credit Cards
Unlike the variable rate, which is subject to change at any time, the fixed rate credit card offers one set rate. The initial rate is sometimes a couple of percentage points higher than a variable rate. However, the advantage is that a fixed rate may not change as quickly as the variable rate credit card.
That said, fixed rates do sometimes change. The credit card company may include the right to change the rate in the card plan. According to the Truth in Lending Act, the lender must provide at least 15 days notice before raising the rate. So make sure to look through the apparent “junk mail” you receive. It could include an announcement that your rate is about to change.
Decide which Rate is Best for You
To decide which rate will fit you best, consider the market fluctuations. The current average rate for variable rate credit cards is 14.72%. The average rate on fixed rate credit cards is 13.33%. Some experts advise getting a fixed rate credit card for its stability. Others suggest opting for a variable rate credit card when interest rates are dropping.
If you are considering a variable rate credit card, first check to see if there are caps on how high or low the interest can go. If the lowest possible rate on the card is 16%, and rates are dropping, you may want to look into other options.
Whether you decide on a variable or fixed rate credit card, be sure to read through the fine print. This will help you find rate fluctuation policies. Some card plans will change the rate after late or missed payments.
If you pay off your balances each month, the interest rate on your credit card will affect you less. However, if you regularly carry a balance (and most Americans do), it is important to understand the difference between variable and fixed rates. Doing so will ensure you are getting the best deal on interest charges.
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Should I apply for a fixed rate loan to pay off credit cards?
I have $25,000 in total credit card debt (3 cards). Interest rates are 4.99, 5.99 and 11.74. The card with the highest balance is also the highest interest rate. According to a debt calculator I used, I can pay them off in 42 months with my income. I have been offered a fixed rate personal loan of $30,000 at 7.74%. I would pay off the credit cards and use the rest for legal fees (personal situation). Using the same debt calculator, I can pay the loan off in 48 months easily and probably sooner.
Is it worth it to apply for the loan? Will it hurt or help my credit? I do need the extra cash and do not want to take it from my home equity or put more on credit cards. Thank you for your responses.
Fixed rate credit cards?
If I get a fixed rate credit card, is it like a fixed rate mortgage where the rate stays the same for the duration of the loan or does a credit card company have the right to later change that to a variable rate? Now of course this is assuming that I pay my bills on time all the time.
Thanks in advance,
212eric
Why would you take 2 credit cards that interest rate is LESS than the fixed rate loan and transfer them to a higher rate?
Use the loan to pay off the highest interest card……pay the minimum on the 2 lower cards but take the payment you were making on the 11% card and send it to the fixed rate. This should help bring that balance down faster. When the fixed rate loan is paid, take that payment and add it to next higher interest card until paid off and then take THOSE payments and send them to the lowest card. Make sense? OR…see if you can do a balance transfer of all 3 cards onto a 0% credit card and go from there. It would only make sense to transfer all 3 if you can.
What is the best place to look for good rate credit cards on line?
I am looking for a website to find low interest rate credit cards with fixed rates and no annual fees? Are their any suggestions as to where to look on the web for these companies?
Can a credit card company raise the APR on a fixed rate credit card that I have never had a late payment on?
If so, is there a way out of it? I do not even you use this card anymore I was just paying on it to pay it off. So I really do not want to put anymore money into this debt then I already have.
Is getting a low fixed rate credit card better than a 0% intro?
I went onto a credit card comparison site called http://www.CreditCardRadio.com It was very helpful and I got a low fixed interest rate credit card. Would it have been better for me to get the 0% intro rate for 12 months? Both options seemed like good deals. My fixed rate is at 4.99% for life of the transfer.
Since you SHOULD be paying off your credit card TOTALLY each month, the rate shouldn’t really matter. If you owe credit card companies money, you’re not handling your finances wisely and you should stop using them.
I pay my credit cards on time, never carry a balance, and i got a notice from one of them that they are increasing my APR. The only reason I can figure is it is a new card that I’ve had less than 2 years. With the economy being the way it is, they don’t want people getting into more debt that they will not be able to handle. It cheeses me that they are doing this, but since I pay off my balances anyway it won’t effect me. If I did need to carry a balance though, I would not use that card.