Fixed Rate Credit Cards Explained By Peter Kenny At Isnare.com Ezine Articles

There are so many types of credit cards around that it can be hard to work out which is the best. However, one type of card that is quite popular is the fixed rate credit card. Fixed rate credit cards give you the peace of mind that your APR will remain the same for a given time, with all the benefits of a normal card. If you want to know more about fixed rate credit cards, then this article can help you.

What does 'fixed' mean?

A fixed rate credit card is a card that has an APR that will remain constant for a certain period of time. Most fixed rate cards offer a fixed APR for around 3 to 5 years. This means that your interest payments will remain the same during this period.

Why get a fixed rate card?

If you have a fixed income and cannot afford your repayments to rise, then getting a fixed rate card would be a good choice. Even before you spend any credit you can work out what the charges will be over the next months and years. This will help you to budget more effectively and know exactly what you will be paying each month. If you want the peace of mind that your repayments will not change, then a fixed rate card is a good idea.

What are the costs involved?

Although fixed rate cards are by no means expensive, they do generally have higher interest rates than variable rate cards. The lender is taking a risk by offering a fixed rate card, because the base interest rate could rise and they could lose out. This is why the interest rates offered on fixed rate cards are on average 2-3% more than regular cards.

Not everything fixed

Although your APR will remain fixed for the next few years, it is important to remember the other charges involved in credit card billing. The lender might not be able to change the APR, but they can always change the late payment fees or balance transfer charges. If interest rates rise you might find that your charges rise too, leaving you with a card that isn't beneficial.

Variable rate cards

The alternative to fixed rate credit cards are variable rate cards. These cards have an APR that can change, usually in line with the base interest rate changes. Although a card issuer is much less likely to reduce your interest if rates fall, they do have to remain competitive and so this could happen. However, more likely is that your rates will rise year on year.

Is a fixed card the answer?

Although fixed cards have the benefit of keeping your repayments at the same rate over the years, they do have higher interest and unless you really want to keep the interest fixed for budgetary reasons, you would be better to stick with a lower APR card and switch cards if the rate rises too much.

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