Millions of Americans use credit cards, so it is no wonder that everyone is looking for the best deal. Low interest rates are at the top of the good deal list, as interest rates are a part of just about every form of credit. Getting a fixed rate is also at the front of the list, but low interest and fixed rates for credit cards are like Cinderella’s pumpkin: they more than likely will disappear after a certain amount of time.
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While recent legislation has helped to stabilize the different interest rates that credit card companies can charge, most credit card lenders still prefer a variable credit card rate to a fixed interest rate. Furthermore, the term fixed is not as set in stone as it would seem. However, some low interest fixed rates are part of an introductory, promotional period for many credit cards.
Difference between Fixed and Variable Interest Rates
All credit cards have an annual percentage rate, or APR. You are charged this amount on top of your balance so that lenders can make a profit. A credit card with an 11% APR will charge $11 for every $100 placed on the card. Credit card APRs are either fixed or variable.
Fixed APRs are so labeled because they cannot change without notice from the credit card company. It would seem that the term fixed means that the rate is set in stone, but The Wall Street Journal’s SmartMoney.com maintains that a fixed APR can be changed as long as your credit card company gives you notice 15 days prior to the change.
You can choose to cancel a credit card if you do not agree with the APR increase.
Conversely, a variable interest rate is an APR that can change without notice. If your credit card has a variable APR, it is assumed that you are aware of it as it was part of the terms of your card that you agreed to when you signed up. A variable APR depends on fluctuations of the prime rate set by banks or the Federal funds rate set by the Federal Reserve. If those other rates go up or down, then your credit card’s variable APR is adjusted accordingly by your credit card company.
Introductory Fixed Rates for Credit Cards
Many credit card companies offer promotions to attract customers. One of the best is sometimes referred to as a teaser rate; credit card companies offer a low or zero percentage rate to get customers to sign up for the card. Essentially, this introductory rate is fixed, at least for a period of time. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 ruled that introductory rates must last for at least six months. Furthermore, the terms of the contract must be constant for a year, but after that, all bets are off.
Most credit card introductory rates last for six months to fifteen months, and a go-to rate kicks in after the promotional period is over. The go-to interest rate of most credit cards is variable, as the credit card companies don’t want to make less of a profit if the prime rate goes up.
Getting Low Interest, Fixed Rate Credit Cards
While most APRs are variable once the introductory period is over, there are some credit cards that have fixed interest rates, but finding one that is considered low will be a challenge. The latest survey of credit card interest rates by Bankrate.com for February 2012 puts the average variable APR at 14.5%.
On average, Americans are paying $14.50 for every $100 borrowed on a credit card. The average fixed interest rate was not far behind at 13.71%.
A low, fixed interest rate would be one that is below the national average of 13.71%, and you would need to be pretty close to the top tier in terms of your credit rating to qualify. Having a high credit score, or one that is approximately 700 points or higher is the first step in getting a low interest, fixed rate credit card. Having a high income and fewer expenses would also help.
The last step to getting a low interest, fixed rate credit card would be to research and compare all the cards available by using the FREE credit card chaser tool right now!
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