Are Variable Rate Credit Cards Better?
By Steve Szasz
When you shop for a card, you will be considering variable rate cards and fixed rate cards. A variable rate card uses the prime lending rate as its benchmark. Each lender then adds his own interest percentage and offers the variable rate card to his customer. Look at it this way – as soon as there is an increase in the interest rates of the Federal Reserve, the bank rates also go up.
The best situation to go in for a card with variable rates is when you notice that the prime lending rate dips steadily. That is when variable rate cards are a good option, since you enjoy the benefit of low lending rates.
However, don’t confuse the interest rate of variable rate cards with introductory offers made to you. These offers are only to attract you and expire after a specific period, say two months or four months. Subsequent to this, your variable rate card will attract a higher rate of interest. So don’t make these special offers a basis for your decision while looking for a card with variable rates.
Factors that could influence the interest rate of your card
When you are looking for a card with variable rates, your personal score and rating as well as your current income will influence the lenders’ decision. Accordingly you can look at standard cards, silver cards, gold cards, platinum cards and titanium cards – with the hierarchy of the card ascending from standard to titanium. So your eligibility for any of these variable rate cards is directly related to how good your history is, since interest rates are highest for standard cards and lowest for titanium cards.
In
a variable rate card, the interest rate is likely to fluctuate periodically. Some card issuers can tell you how low or how high the interest rates are likely to vary so that you can decide upon your variable rate card based on this. If this fluctuation is still advantageous to you, as compared to a fixed rate card, you may consider a variable rate card.
No card is immune to interest rate fluctuation. Since variable rate card interest rates are based on the prevailing market rates, you’ve got to watch out constantly to see if it is a good option for you; if not you may want to look for another variable rate card where the issuer gives you a better deal. It is a very competitive market out there.
Steve Szasz is a publisher of numerous finance related articles and webmaster of 6 finance themed websites on loans, insurance and investment. His website url is called Credit Card Company
