These days, almost all credit cards come with a variable interest rate. If you’re looking for a fixed-rate credit card, you’ve probably noticed that the vast majority of card issuers don’t offer fixed rates. This is mainly because card issuers don’t want fixed rates when the Federal Reserve raises interest rates.
But you should know that variable APR credit cards aren’t necessarily subject to sudden fluctuations in interest rates. In fact, in many cases, a variable rate card can give you the stability you’re looking for. Depending on your credit score, you might even qualify for a lower interest rate than you’d expect.
Let’s take a closer look at why fixed-rate cards are hard to find and how variable APR cards may actually be better for you.
What is a fixed-rate credit card?
Most of today’s best credit cards have variable rate structures, with their APRs tied to an underlying index, like the prime rate. As the index rate rises or falls, the APR on a variable rate card typically follows suit. In contrast, as the name suggests, the APR on a fixed rate credit card isn’t automatically affected by fluctuations in the prime rate.
Like adjustable-rate credit cards, fixed-rate credit cards are offered as unsecured cards or secured (meaning the cardholder must put down a line of credit as collateral). Fixed-rate cards can offer rewards and may have annual fees; however, the specific rewards vary by issuer.
Fixed-rate credit card offers are rare. There are a few options available nationwide, but they can usually be found at a local bank or credit union. Fixed-rate cards offered by local credit unions may be subject to membership in the organization, and some consumers may not qualify for these cards.
Fixed-rate credit cards aren’t as stable as you might think
It’s important to understand that fixed-rate credit cards don’t mean your interest rate will stay the same forever. Card issuers can and do increase interest rates on fixed-rate cards.
Fixed-rate cards don’t fluctuate with the prime interest rate, but your card issuer may increase your interest rate if your circumstances change, such as a lower credit score or missed or late payments.
The virtual demise of fixed-rate cards can more or less be attributed to the Credit Card Act of 2009, which introduced a number of consumer protections, including protections against unauthorized interest rate increases on credit cards.
By law, card issuers must fix the APR for the first year of an account (though exceptions apply). After that, card issuers have the right to change the interest rate and other card terms with 45 days’ written notice to the cardholder. As long as these requirements are followed, card issuers can change the interest rate on a fixed-rate card at any time after the first year.
According to Ted Rothman, senior industry analyst at Bankrate.com, “[The Credit Card Act]basically says that the easiest way for issuers to raise interest rates on existing balances is to tie the interest rate to an underlying index like the prime rate,” Rothman said. “So today, a lot of cards — in fact, almost all credit cards — have switched to this adjustable-rate structure.”
Floating rates aren’t as volatile as they may seem. “If the Fed were to raise rates, recent trends suggest they’re reluctant to do so,” Rothman said. “If they do raise rates, it’s likely to be only a quarter-point increase.”
The best card for you is probably one with a variable interest rate.
Before deciding whether a fixed-rate credit card is right for you, it’s worth thinking hard about what you want to get out of this type of card. Are you looking for a fixed rate because you need to pay for a large purchase over a long period of time and don’t want to carry a balance and have interest rates rise and fall behind on your payments? Or are you consolidating high-interest debt and want a card with a guaranteed low interest rate to avoid any surprises while you’re paying it off?
In this case, while a fixed-rate card may seem attractive, you’re probably better off with a 0 percent introductory APR card that offers a longer period during which you won’t pay any interest at all. If you can pay off the balance on that new refrigerator or long-awaited vacation during the introductory APR period, that will beat a card that charges interest, whether it’s a fixed or variable rate.
Below are some of the best 0 percent introductory APR offers currently available, all of which come with promotional periods on both purchases and balance transfers.
| Card Name | First-time purchase bonus | Balance Transfer Offers | Regular APR (Variable) |
|---|---|---|---|
| Wells Fargo Reflect® Card | 21 months | 21 months (if the balance is transferred within 120 days of account opening) | 18.24%, 24.74%, or 29.99% |
US Bank Visa® Platinum Card* | 21 Billing Cycle | 21 billing cycles (if balance transferred within first 60 days) | 18.74% to 29.74% |
| Bank of America® Customized Cash Rewards Credit Card | 15 Billing Cycles | 15 billing cycles (if balance transferred within first 60 days) | 19.24% to 29.24% |
| Wells Fargo Active Cash® Card | 12 months | 12 months (if the balance is transferred within 120 days of account opening) | 20.24%, 25.24%, or 29.99% |
You might also consider a low-interest credit card if you don’t think you’ll be able to pay off your balance during the promotional period, or if you expect to carry small balances periodically and want a longer-term option.
These cards charge interest from day one, but may offer lower variable interest rates than other card options, depending on your credit score. It’s important to note that some of the cards with great introductory APR offers mentioned above also offer cardholders a low ongoing APR (again, based on credit score).
Here are some of the best cards that could potentially offer lower than the current average interest rate.
| Card Name | Best for | Variable interest rate |
|---|---|---|
| Upgrade Cash Rewards Visa® | Fair Credit | 14.99% to 29.99% |
| Discover it® Cashback | First year rewards | 18.24% to 28.24% |
| Citi Rewards+® Card | Point rounding up feature | 18.74% to 28.74% |
| American Express Blue Cash Everyday® Card | Cashback for families | 19.24% to 29.99% |
Conclusion
While a fixed-rate credit card might seem like the best way to lower your interest payments, there are usually better ways to pay less, and they’re pretty easy to find. Whether your credit card has a fixed or variable interest rate isn’t as important as getting the lowest interest rate possible or the promotional rate you need to afford to pay off your balance.
If you know you won’t be able to pay your balance in full each month, focus on getting the lowest interest rate you can, whether it’s a card with a 0 percent introductory period or a credit card with a consistently low APR.
*Disclosure documents required by issuer
Information about US Bank Visa Platinum Cards were collected independently by Bankrate and card details have not been verified or endorsed by the card issuer.Bank of America® Customized Cash Rewards credit card information last updated on August 10, 2024.
