What you should know about fixed-rate credit cards

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In a Nutshell

Fixed-rate credit cards aren’t as common as they used to be, but there are still some out there. Credit unions often have fixed-rate cards, so check them out for options that could work for you.
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With most credit cards, your interest rate will fluctuate based on an index rate such as the prime rate.

But if you have a fixed-rate credit card, you don’t have to worry about the rate rising and falling along with changing index rates. The problem? Fixed-rate cards can be a little hard to find.

If you carry a balance on your credit card, it may be worth doing the research to find a credit card with a fixed APR. Otherwise, it may not be worth the trouble. Here’s what you need to know about fixed-rate credit cards and what you can do if you can’t find one.

The difference between variable-rate and fixed-rate credit cards

Variable-rate credit cards, which are more common today, charge an annual percentage rate of interest, or APR on a credit card, based on an index rate such as the prime rate. The prime rate is a fluctuating rate that’s tied to the federal funds target rate, which is reset periodically by a committee at the Federal Reserve. When the prime rate changes, the APR on your variable-rate card will likely change too.

With fixed-rate credit cards, on the other hand, the APR won’t fluctuate based on an index rate such as the prime rate. And although a card issuer can change a fixed rate, there are legal restrictions limiting how and when that’s allowed.

If you’re missing the good old days when it was easy to find a fixed-rate credit card, it’s important to understand that fixed-rate credit cards before the Credit Card Accountability, Responsibility and Disclosure Act of 2009 weren’t all that fixed anyway. The reality was that card issuers had the right to change a fixed rate for a number of reasons, as long as they gave cardholders a certain amount of notice.

When the CARD Act made it harder to change “fixed” rates — with a 45-day notice period and other requirements — issuers shied away from offering them, and variable-rate credit cards became the norm.

Will my fixed-rate credit card always remain fixed?

The law requires that card issuers keep APRs the same for the first 12 months from account opening — with some exceptions (including if you don’t make your minimum payment within 60 days of the due date, or if you had a variable rate to begin with). Beyond that, card issuers can change a fixed rate or transition a fixed-rate card to a variable rate, but typically must provide you with a 45-day written notice before making the change.

Where to get a fixed-rate credit card

In a search of 183 credit card issuers that filed their credit card agreements with the Consumer Financial Protection Bureau in 2020, only 43 had listed fixed-rate credit cards. Many of them are local credit unions and community banks.

UNIFY Financial Credit Union

UNIFY offers members the Fixed Rate Visa® Credit Card, which comes in three versions: Visa® Classic, Visa® Gold and Visa® Platinum. Depending on which one you qualify for, you could get a fixed rate as low as 9.49%. You also won’t pay an annual fee, balance transfer fees or cash advance fees. Finally, the Fixed Rate Visa® Credit Card has an intro APR offer of 5.49% on purchases for the first six billing cycles, and on balance transfers for the first 12 billing cycles, with no balance transfer fee. Then your rate will jump back up to the regular fixed rate.

Those who aren’t eligible for membership with UNIFY based on where they live or work may still be able to join by choosing one of the credit union’s affiliate partners. There’s no ongoing charge or commitment on your part if you go this route.

Cencap Federal Credit Union

The Cencap Visa credit card offers a fixed 9.9% APR. The credit union serves people who live, work, go to school or worship in certain underserved areas in and around Hartford, Connecticut.

Local banks and credit unions

If you’re looking for a fixed-rate credit card, check with your local financial institutions to see what they offer. But be sure to read all terms and conditions closely before you apply — and talk to a bank or credit union representative to clarify those terms and ask any questions. Confirm that the rates offered are indeed “fixed,” and ask what may trigger any changes in the APR.

If you’re looking to finance a large purchase but don’t plan to carry a balance regularly, another option to consider is a card with an intro 0% APR promotion. These cards can help you pay off a large purchase interest-free over a set period.

Before you pick a card, think about your goal and focus on which type of low-interest credit card can give you the best results.

How to protect yourself from a rising variable APR

If you’ve noticed that your credit card’s variable APR has risen steadily along with changes to the prime rate, there are a few things you can do to avoid paying the higher cost.

Always pay on time and in full

Chances are that your credit card offers a grace period between your statement date and your due date. If you pay off your card balance in full during this period, which must be at least 21 days, you won’t need to pay any interest on the balance.

If you spend only what you have and always pay your balance in full, it’s unlikely you’ll feel the effects of an ever-changing purchase APR.

Avoid triggering other interest rate hikes

If you miss a payment and don’t catch up within 60 days, it could trigger a penalty APR, which can be as high as 29.99%.

Another way that you could end up paying more in interest than you bargained for is with cash advances. Many credit cards charge a higher APR on cash advances than on purchases, on top of a cash advance fee for processing the transaction. What’s more, cash advances don’t come with a grace period, which means that interest starts accruing from the transaction date.

Carefully read your credit card statements

If your credit card issuer raises your variable interest rate, it could choose to send a letter or simply include the change in your credit card statement — they’re not required to notify you. Keep an eye on your statements to spot any rate hikes. If your rate gets too high and you carry a balance from month to month, it might be worth considering a card with a lower rate.

Next steps

Fixed-rate credit cards can be helpful if you carry a balance on your credit card and want a rate that’s likely to be steadier. But if you don’t plan to carry a balance on your card, the APR likely won’t matter as much.

As you consider whether to get a credit card with a fixed or variable rate, be sure to think about other card features — such as rewards, fees and bonuses — to make sure you get the all-around best card for your needs.

About the author: Ben Luthi is a personal finance freelance writer and credit cards expert. He holds a bachelor’s degree in business management and finance from Brigham Young University. In addition to Credit Karma, you can find his wo… Read more.