Fixed rate credit card

Fixed rates of credit cards are not prone to fluctuation in interest rates like the variable rate credit cards. So the interest rate that is agreed upon while the application for the credit card is made holds good till the credit card issuer changes the rate. Card issuers do change the rates of fixed rate cards after a notice of 15 days. The customer must be alert and read such changes which will be mentioned in the billing statement. It just means that fixed rate is not dependent upon prime rates. Generally, the number of customers having variable rate cards is much more than those who have fixed rate cards. 

Credit card issuers are choosing variable rates instead of fixed rates for charging the customers and this is due to a new law. Generally, variable rates benefit the card issuers during times of high rate prevalence. When rates fall, fixed rates are preferred by the card issuers, since they want steady payments.

The current law reduces the freedom of the creditors in increasing the interest rates. Anyway, the law cannot control prime rate’s variations and this is the index which forms the base for cards that use the variable rates. Since the variable rates are dependent upon prime rate, they will change when there is a change in the prime rate. Thus, the latest law can only limit the rate hikes. 

Chances are that student credit cards or those which are related to debt assistance will be permitted to continue with fixed rates. Those who would not be able to choose variable rates can close the accounts. In the present scenario, the rates will rise. The card issuers have to inform their customer’s minimum 45 days before making the new changes. The older guideline was 15 days.

In spite of the general trend, some card issuers would want to use fixed rates, so that customers who prefer fixed rate will get in touch with them. When the prime rates reach a maximum, there is a chance for fixed rates to become the practice.

Variable rate credit cards benefit the card holder when the prime rates are falling and vice versa. So, the decision of the customer should be based upon the general trend of the market. Many cards in the recent times have attractive introductory offers and it is left to the customer to check the overall features of the card and the introductory offer before making a decision.

What adds to the profits of the card issuers will not benefit the card holder, since the card issuers will always watch the market and act accordingly. They will plan to make more profits by adopting variable rate when the prime rates are on the rise. This is the time when the card holder should choose fixed rate cards, so that they can pay less to the card issuer. At the same time, the fact is that the rates of fixed rate cards are also subjected to change.