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Are credit card rates fixed or variable?

Yahoo Personal Finance· Getty Images
Kat Tretina and Kendall Little
Updated 5 min read

If you're like most people, you may have credit card debt. According to a recent study released by J.D. Power, more than half of American consumers maintain a balance on their credit cards.

If you carry a balance on your card, interest can accrue rapidly. But how interest builds depends on your card's annual percentage rate (APR) and the type of rate it charges — is your credit card rate fixed or variable?

With a variable interest rate, the credit card's APR changes along with market conditions. By contrast, a fixed-rate card is set independent of market changes, and is more steady.

The majority of credit cards have variable APRs. You can find some fixed-rate cards, but they tend to be issued by credit unions rather than major banks or national financial institutions.

  • Widely available

  • Cards aren't limited to certain groups

  • More options for cards with rewards and perks

  • Higher APRs than fixed-rate cards

  • May charge annual or monthly fees

  • Rates can change at any time

When you are approved for a credit card with a variable APR, your initial rate is based on your credit and market conditions. Credit card issuers usually tie the card's APR to an index, such as the Prime Rate — the standard rate banks use when setting their rates for loans, lines of credit and credit cards.

The Prime Rate is added to the company's margin to determine your APR. For example, a company may charge the Prime Rate + 12.00%. As of December 2023, the Prime Rate is 8.50%, so the APR on that credit card would be 20.50%.

When you view your billing statement, you may see the rate has changed from the previous month. Because the rate is variable — and that's made clear in the card's terms and conditions — the company doesn't have to notify you when the rate changes due to an increase in the index.

Below, we’ve outlined a few examples of credit cards with variable APRs, and the interest rates they offer today. These are often (but not always) expressed as ranges; you’ll be approved for a rate within that range when you apply.

The examples here are designed to show the range of credit cards that carry variable rates — from travel and rewards credit cards to secured and balance transfer credit cards — and just how common they are.

  • Lower-than-average APRs

  • Less fluctuation in rate

  • Usually without annual fees

  • Not widely available

  • Must meet credit union membership requirements

  • Limited options and rewards programs

With a fixed-rate credit card, your rate isn't tied to a particular index. The issuer sets the APR based on your creditworthiness and its own policies, and the rate doesn't change along with Prime Rate or other indices.

However, that doesn't mean your APR will never change. The issuer can increase the card's APR, but they have to notify you ahead of time. Under the current laws, credit card issuers must notify customers at least 45 days in advance that the rate or fees will change.

Fixed-rate cards are less common than variable-rate cards, and are often issued by credit unions. Because they're offered by credit unions, they tend to have lower-than-average APRs.

Below are three examples of fixed-rate cards available now:

To qualify for a fixed-rate card issued by a credit union, you must meet that credit union's membership criteria. Some credit unions have strict requirements, and not all credit unions have fixed-rate credit card options, so you may not be eligible for a card with a fixed APR.

Regardless of whether your credit card is fixed or variable, credit cards overall tend to have higher interest rates than other forms of credit, such as personal loans. And with that higher rate, interest can accrue rapidly, causing you to pay far more than you initially charged over time.

To reduce how much you pay in interest charges on a fixed- or variable-rate credit card: follow these tips:

  • Pay the statement balance: You can avoid paying interest by paying off your statement balance in full by the payment due date. If you do that, no interest will accrue at all.

  • Pay more than the minimum: If you can't afford to pay off the entire statement balance, try to pay more than the minimum. Even a small additional amount — such as $10 or $20 more than the minimum required — can reduce how much interest builds on your card.

  • Request a rate reduction: If you've been a customer for several years and have a positive credit history, contact the credit card issuer and ask for a rate reduction. Some companies will give rate reductions to retain their customers, so you could be eligible for a lower rate and save money.

Whether a fixed APR is better than a variable APR depends on several factors, including your credit and your card use.

In general, fixed-rate cards provide more stability since interest rate changes are less common. But variable-rate cards are more common and widely available, so you have more options.

Fixed-rate cards are typically available from credit unions. They tend to have low rates and fees, but they're only offered to qualifying credit union members.

Fixed-rate cards are uncommon. Cards are only available from select credit unions, so you must meet the membership requirements of an issuing credit union. Since they're not available to the general public, they're harder to get than variable-rate cards.

Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn't include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.