Key takeaways
- Unlike variable-rate credit cards, fixed-rate credit cards come with set interest rates that do not change according to an underlying index (like the prime rate).
- There are several circumstances where the interest rate of a fixed-rate card can change, including a change in your credit score or a missed payment.
- Low-interest variable-rate cards and credit cards that offer 0% promotional APRs can be better alternatives than fixed-rate cards in many cases.
Nearly all credit cards come with variable interest rates these days. If you’re looking to find a fixed-rate credit card, you’ve likely noticed the overwhelming majority of card issuers simply don’t offer them. That’s largely because issuers don’t want to be locked in when the Federal Reserve raises interest rates.
But you should know that a credit card with a variable APR won’t necessarily leave you at the mercy of wildly fluctuating interest rates. In fact, in many cases you can get the stability you’re seeking with a variable rate card. Depending on your creditworthiness, you may even get a lower interest rate than you might expect.
Let’s take a closer look at why fixed-rate cards are so hard to find and how you may actually be better served by a variable APR card.
What is a fixed-rate credit card?
Most of today’s best credit cards follow a variable rate structure, meaning that their APR is tied to an underlying index like the prime rate. As the index rate rises and falls, the APR on variable rate cards typically follows. By contrast, as the name would suggest, the APR of a fixed-rate credit card isn’t automatically affected by prime rate fluctuations.
Like their variable-rate counterparts, fixed-rate credit cards can be offered as unsecured cards or on a secured basis (meaning that cardholders must deposit the amount of their credit line to serve as collateral). Fixed-rate cards can offer rewards and may come with an annual fee, though specific offerings vary by issuer.
Fixed-rate credit card offers are rare. While there are some nationwide options, you’ll typically find them at your local bank or credit union. Fixed-rate cards offered by local credit unions may be subject to the organization’s membership requirements, meaning that 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 a fixed-rate credit card doesn’t mean you’ll have the same interest rate forever. Card issuers can — and do — raise your interest rate even with a fixed-rate card.
A fixed-rate card won’t fluctuate with the prime rate, but a change in your circumstances, such as a drop in your credit score or missed or late payments, may prompt your issuer to raise your interest rate.
The virtual disappearance of fixed-rate cards can be traced more or less to the Credit CARD Act of 2009. This legislation ushered in a number of consumer protections, including protection against random rate increases without warning on their credit cards.
By law, card issuers must lock APRs for an account’s first year (though exceptions do apply).
The Importance of Understanding Fixed-Rate Credit Cards
After the initial year, credit card issuers have the right to modify interest rates and other terms as long as cardholders receive a 45-day notice in writing. This gives issuers the flexibility to adjust interest rates on fixed-rate cards at any time, provided they adhere to the notification requirements.
Ted Rossman, a senior industry analyst at Bankrate.com, explains that the Credit CARD Act has led to a shift towards variable rates tied to indexes like the prime rate. This change has made variable rates more common among credit cards.
Despite concerns about the volatility of variable rates, recent trends show that interest rate hikes by the Federal Reserve have been gradual. Even when rates do increase, the adjustments are typically modest.
Choosing the Right Credit Card for Your Needs
Before opting for a fixed-rate credit card, consider your financial goals and spending habits. If you anticipate carrying a balance for a large purchase or consolidating debt, a card with a 0 percent intro APR may be more beneficial. These cards offer a period with no interest charges, allowing you to pay off your balance without accruing additional costs.
Here are some of the top 0 percent intro APR offers available, featuring promotional periods for both purchases and balance transfers:
| Card Name | Intro Purchase Offer | Intro Balance Transfer Offer | Regular APR (Variable) |
|---|---|---|---|
| Wells Fargo Reflect® Card | 21 months | 21 months (on balance transfers made within 120 days) | 18.24%, 24.74% or 29.99% |
| U.S. Bank Visa® Platinum Card* | 21 billing cycles | 21 billing cycles (on balance transfers made in first 60 days) | 18.74% to 29.74% |
| Bank of America® Customized Cash Rewards credit card | 15 billing cycles | 15 billing cycles (on balance transfers made in first 60 days) | 19.24% to 29.24% |
| Wells Fargo Active Cash® Card | 12 months | 12 months (on balance transfers made within 120 days) | 20.24%, 25.24% or 29.99% |
If you expect to carry a balance beyond the promotional period or need a longer-term solution, a low-interest credit card may be a better fit. These cards offer a lower variable rate from the start, depending on your creditworthiness.
Consider these top cards with lower interest rates compared to the average rate:
| Card Name | Best For | Variable APR |
|---|---|---|
| Upgrade Cash Rewards Visa® | Fair Credit | 14.99% to 29.99% |
| Discover it® Cash Back | First-Year Rewards | 18.24% to 28.24% |
| Citi Rewards+® Card | Points Round-Up Feature | 18.74% to 28.74% |
| Blue Cash Everyday® Card from American Express | Cash Back for Families | 19.24% to 29.99% |
Key Takeaways
While fixed-rate credit cards offer stability, exploring other options can lead to lower interest costs. Whether you choose a fixed or variable rate card, focus on securing the lowest interest rate possible or take advantage of promotional periods for interest-free payments.
If carrying a balance is unavoidable, prioritize finding a card with a low ongoing APR or introductory period to manage your debt effectively.
*Issuer-required disclosure statements
Information about U.S. Bank Visa Platinum Card has been collected independently by Bankrate. Card details have not been reviewed or approved by the card issuer.Bank of America® Customized Cash Rewards credit card information was last updated on Aug. 10, 2024.