When a Fixed Rate Isn’t Really Fixed

Imagine that you get a credit card offer in the mail that says that you’re going to be given a fixed rate for your credit card. Does this sound like an offer that you should take advantage of? Maybe. Or maybe not. Whether or not a fixed rate on a credit card is a good deal depends on the specific terms of the fixed rate agreement as well as on what’s happening in the credit market at the time that the offer is made. Additionally, you should know that there are times when a fixed rate isn’t truly fixed which means that you might not benefit from going ahead and accepting the deal.

The first thing that you need to understand is what it means to have a fixed interest rate on your credit card. This means that you are going to have the same interest rate for the duration of the contract no matter what happens in the economy or the credit card market. If you can get a low fixed interest rate then this could be a good thing. Most people have a variable interest rate on their credit card which means that it changes during changes in the market. At times, the variable interest rate may be lower than a fixed interest rate but if you got a good deal on a fixed interest rate then you could theoretically save money over the long run on the interest.

So, that makes the fixed interest rate seem like a good deal and indeed it might be. But you should know that the fixed interest rate isn’t always actually fixed. There are things that might happen which could terminate the contract. When the fixed rate contract is terminated, the new rate that is applied is often quite high. This could mean that you’ll want to look carefully at the terms of the agreement before you move forward with accepting a fixed rate credit card

The main thing that is going to cause problems with a fixed rate interest card is a violation of any of the terms in the credit card agreement. This means that it is crucial that you read and understand all of the fine print that is given to you when you are looking over the fixed rate card offer. Oftentimes you will find that the fixed rate is lost if you make a late payment or go over the credit limit on your account. If you don’t know that then you may be shocked when you get the credit card bill in the mail and see that the interest rate has changed dramatically.

You should also be aware of the fact that there are things that can happen to your credit that may impact the fixed rate even though you are making on-time payments to this credit card. Sometimes credit card companies do periodic requests for your credit report. If your credit score has gone down considerably since the time that you got the fixed rate interest card then they might reserve the right to change your interest. Be aware of these things when trying to determine what the benefits are of getting a fixed card.

This entry was posted on Friday, August 15th, 2008 at 8:16 am and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.