How To Find Fixed-Rate Credit Cards

A fixed-rate credit card charges a determined annual percentage rate (APR) on balances carried over from month to month. Unlike variable-rate credit cards, where the interest rate can fluctuate based on market conditions or changes in the prime rate, a fixed-rate credit card maintains a consistent interest rate over time.

Fixed APR credit cards may help cardholders budget for large purchases or allow them to pay down debt in a more reasonable time frame. Having a predictable interest rate can make you feel more in control of your debt. With a fixed-rate credit card, the APR remains constant on purchases regardless of changes in the broader economy. For account holders in good standing, if you carry a balance on your card, the interest rate you pay will remain at the time of purchase or when you pay off the balance.

Similar to variable rate credit cards, fixed-rate credit cards come with a variety of terms. You can find secured and unsecured fixed-rate cards. Some fixed APR cards are available with no annual fee or allow cardholders to earn rewards, but obviously this will vary between issuers.

Regardless of the card terms, fixed-rate cards offer the same purchasing power as variable rate credit cards. If your fixed APR card is a Visa or Mastercard you also receive the same purchase protections and zero liability of other card holders. As with most credit cards, you also have the option to pay your balance in full each month. If you only use your fixed-rate card for purchases and do not carry a balance, you can avoid interest payment altogether.

Predictable Interest Rates

The primary benefit of a fixed-rate credit card is a predictable APR on purchases. When you apply for your fixed-rate credit card you are approved for a set interest rate on all purchases. Depending on the card, your APR may be based on your creditworthiness at the time of your application or there may be a set APR as a standard feature of the card.

Either way, that interest rate will not change during the first year of your account. After the first year, if your card provider wishes to change your interest rate, they must inform you more than 45 days before the rate change takes effect. While variable-rate cards also lock in your interest rate as a percentage over the prime rate, card holders will see those rates regularly fluctuate without notice as the prime rate does.

It’s important to note that the fixed rate typically applies only to the balance carried over from month to month, any balance transfers and cash advances may have different interest rates or terms. Also, fixed rate credit cards may charge other fees, such as an annual fee or balance transfer fee, so it’s essential to read the terms and conditions of the card carefully.

Your Rate May Still Increase

Even with a fixed-rate credit card, your APR may still increase. Your card provider can increase your rate if they provide sufficient notice. However, the new rate will only apply to purchases made more than 14 days after you received notice of a rate change. If you’re in good standing, any outstanding balance before the new rate goes into effect will retain the original rate until it’s paid off.

Additionally, your card provider can increase your interest rate if your minimum payment is more than 60 days late. You may also be subject to late payment fees.

If you’re searching for a credit card with a fixed rate, you may notice that most well-known card issuers do not offer this option. The prevailing structure for most top credit cards today is based on variable rates, wherein the Annual Percentage Rate (APR) is linked to an underlying index like the prime rate.

Currently, most fixed-rate offers are available from credit unions, although your community bank may also offer a fixed APR card. Be aware that credit unions typically require membership, which may be dependent on where you live or work and often requires a small share fee. However, many credit unions will allow you to join if you make a charitable contribution to an affiliate non-profit.

Overall, fixed-rate credit cards offer interest predictability. These cards may be a great option when you need to carry a balance. However, if you pay your card off each month, you likely won’t benefit from a fixed rate credit card.