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Fixed-Rate vs. Variable-Rate Credit Cards: What You Need to Know

At O1ne Mortgage, we prioritize your financial education and well-being. Understanding the nuances of credit card interest rates can help you make informed decisions that align with your financial goals. In this article, we will explore the differences between fixed-rate and variable-rate credit cards, and provide tips on how to choose the best option for your needs.

Is a Credit Card Variable or Fixed Rate?

Credit cards can have either a variable or a fixed interest rate. However, most credit cards come with a variable annual percentage rate (APR). This means the interest rate can fluctuate based on changes in a benchmark rate, such as the prime rate. These fluctuations can impact the amount of interest you accrue on purchases, balance transfers, and cash advances, as well as your monthly minimum payment.

Fixed-Rate Credit Cards

Fixed-rate credit cards offer a stable interest rate that does not change based on market conditions. These cards are less common and are often offered by smaller banks and credit unions. Here are some key features of fixed-rate credit cards:

• Low APR: Fixed-rate cards often have a lower APR compared to variable-rate cards. Some may even offer promotional APRs, such as a temporarily lower or 0% APR for purchases or balance transfers.
• Fewer Fees: These cards may come with fewer and lower fees, such as no balance transfer or cash advance fees.
• Limited Rewards: Fixed-rate cards may not offer extensive rewards programs or cardholder benefits compared to cards from larger issuers.

While fixed-rate cards provide stability, it’s important to note that the issuer can still change the interest rate under certain conditions, such as after the first year or if you miss payments.

Variable-Rate Credit Cards

Variable-rate credit cards are more common and are offered by most major card issuers. These cards have an interest rate that can change based on a benchmark rate. Here are some pros and cons of variable-rate credit cards:

• Many Options: With variable-rate cards being the norm, you have a wide range of options to choose from, including rewards, airline, and hotel cards.
• Customizable Rewards and Fees: If you have a good credit score, you can select a card that offers rewards programs, fees, and benefits that suit your needs.
• Rate Changes: The interest rate can change without notice based on fluctuations in the benchmark rate. This can affect both existing and new transactions.

Similar to fixed-rate cards, the issuer can change the fixed portion of your card’s interest rate after the first year or if you fall behind on payments.

How to Find Fixed-Rate Credit Cards

Finding a fixed-rate credit card may require some extra effort, as they are less common. Here are some tips to help you find one:

• Check Local Credit Unions and Banks: Smaller financial institutions, such as community banks and local credit unions, are more likely to offer fixed-rate cards. Visit their websites or local branches to inquire about their offerings.
• Compare Rates, Benefits, and Fees: If you find several options, compare their interest rate ranges, benefits, and fees to determine the best fit for your needs.
• Apply and Become a Member: Apply online or in a branch to see if you qualify for the card. If the card is from a credit union, you may need to become a member, which could depend on your location or employment.

Once you have your new credit card, it will function similarly to a variable-rate card. Remember, your purchases won’t accrue interest if you pay off your balance in full each month.

Frequently Asked Questions

Can a Credit Card Have Fixed Interest?

Yes, some credit cards offer fixed interest rates, but they are less common and typically provided by smaller banks and credit unions.

Is Fixed Interest Better Than Variable?

It depends on your financial situation and preferences. Fixed interest rates provide stability, while variable rates offer more options and potential rewards. Consider your financial goals and risk tolerance when choosing between the two.

Can the Rate Change on a Fixed-Interest Credit Card?

Yes, the issuer can change the interest rate on a fixed-interest credit card under certain conditions, such as after the first year or if you miss payments.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we are committed to helping you achieve your financial goals. Whether you’re looking for a new credit card or need assistance with mortgage services, our team of experts is here to help. Call us today at 213-732-3074 to learn more about our services and how we can assist you.

Thank you for choosing O1ne Mortgage. We look forward to working with you!

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