If you check your credit card statement frequently, which you should, you may notice that you are charged with interest on the money that you do not pay back. Interest is calculated based on the rate you are given when you decide to open a credit line.
Whether they are fixed or variable, the difference can really affect how much you’re ultimately paying. Follow through on how we break down the different interest rates!
Table of Contents
What’s Fixed Interest Rate?
Generally, if you’re in this category of interest rate then your rates generally stay the same but can change due to certain circumstances. Interest rates can chance unless the following happens:
- Being 60+ days late on your credit card payments
- You signed up when there was a promotional rate, which has now ended
- Completing a debt management program to reduce interest rates
Whoever you open a credit line with, they must notify you within 45 days in advance before the increase goes into effect. You may be allowed to opt out of the increase in interest rates and repay using the old interest rates.
What’s Variable Interest Rate?
Variable interest rates is usually a set interest rate added to another. For short, it’s mainly an interest rate tied to the growth of the economy. Your variable interest rates go up and down depending on the underlying rates if they go up or down.
Credit card issues don’t need to send out notices on when variable interest rates goes up or down due to the change in underlying rates. Unless you check your billing statement, you will not know whether or not your interest rate has changed.
Fixed Rate or Variable Rate?
One of the primary benefits of a fixed interest rate is that your interest rates will never increase unless one of the three rules apply to you. You can also opt out of the rates due to the fact that the credit card issuer has to notify you within 45 days of an increase. There is backlash due to opting out which may end up hurting your credit.
Variable interest rate is predictable due to the news or when the Feds increase or decrease the interest rates. You’re also able to opt out, but you will not be notified of the increase in interest rates due to the change in underlying rates.
Better yet, if you pay your bills before the end of your billing or statement period, then you don’t even have to worry about the fixed or variable rates! This is due to the fact that interest isn’t accumulated because the amount owed is paid off before the billing period.
What’s better, fixed or variable interest rates? When it comes down to it, it really does depend. Fixed is good if none of the cirucmstances stated above applys to you. Variable is good because it can lower depending on how the economy is doing.
Regardless, the best thing to do is to avoid interest overall and pay your statement balance on time. This way, you don’t need to worry about fixed or variable interest rates. Check out our list on how to Save Money and earn Credit Card Bonuses here at HMB!
|BMO Harris PremierTM Checking: Earn $350 cash bonus when you open a new PremierTM Checking Account and have a total of at least $7,500 in qualifying direct deposits within the first 90 days. Learn More---BMO Harris Premier Checking Review|
|U.S. Bank SmartlyTM Checking: Earn up to $600 bonus when you open a new U.S. Bank SmartlyTM checking account and a Standard savings account and complete qualifying activities. Subject to certain terms and limitations. Offer valid through February 7, 2023. Member FDIC. Apply Now---U.S. Bank Checking Review|
|Discover Online Savings Account: Earn $200 Bonus/$150 Bonus with promo code HMB323 by 03/15/2023 along with a competitive interest rate of 3.30% APY. Fund your first savings account with a minimum of $25K within 30 days of account open date to earn the $200 Bonus (fund $15K to earn $150 bonus). No minimum opening deposit, no minimum balance requirement, and no monthly fees. See advertiser website for full details.
Apply Now---Discover Savings Review
|HSBC Premier Checking Account: Earn $500 bonus for eligible new customers who open a new HSBC Premier checking account and complete the following qualifying activities. Make recurring monthly Direct Deposits totaling at least $10,000. Member FDIC Terms|
|Chase Private Client: Enjoy a $2,000 bonus when you open a new Chase Private Client Checking account with qualifying activities. Within 45 days of coupon enrollment, transfer a total of $250,000 or more in new money or securities to a combination of eligible checking, savings and/or investment accounts (excludes Chase business checking and savings accounts, any J.P. Morgan Self-Directed Investing & Automated Investing, J.P. Morgan Personal Advisors Accounts, J.P. Morgan Wealth Management retirement accounts and CDs), and maintain the balance for at least 90 days from coupon enrollment. Learn More---Chase Private Client Review|