If you want a credit card, you might have to choose between one with a variable rate or one with a fixed rate. Fixed rate cards are easy to understand, but it can be harder to figure out if a variable card is right for you. If you want to know more about variable-rate credit cards, here are some of the bad things about them and the good things about them.
What is the meaning of variable?
The interest rate on a card with a variable rate will change with the Bank of England base rate. The credit card company will keep an eye on the base rate set by the Bank of England and add a certain percentage to that. For instance, if the base rate is 4% and the card issuer adds another 5%, your credit card rate will be 9%. Your interest rate will change if the base rate goes up or down. For instance, if the base rate went down to 3.5%, your rate would go down to 8.5%.
Costs of a rate that changes
Most of the time, variable rate cards are cheaper than fixed rate cards, but you do run the risk of the interest rate going up over time. Fees and other terms of variable rate cards vary from one issuer to the next, so you'll need to look around to find one that fits your needs.
Low rates of interest
Getting a variable rate credit card is a good idea right now because interest rates have been low or going down for the last ten years or so, and there are no signs that they will go up quickly in the near future. Even if they do go up, it takes a while for interest rates to go up by a lot. Even a change of 1% can take a year or so. Even though it's not a good way to choose a credit card to wait for the market to go down, variable rate cards look pretty good right now.
A set of cards
Even though variable rate cards usually have higher interest rates, you can be sure that the rate won't change over the next few years. A fixed-rate credit card is a good choice if you want to know that your interest rates won't change. If the interest rates went up during this time, you would save money and feel more secure. If you think rates will go up, get a card with a fixed rate.
Getting rid of your debt
If you pay off your balance in full every month, it doesn't matter if you get a variable rate card or a fixed rate card because you won't be charged interest. If you always pay off your balance in full, you should get a variable rate card because the rates will probably be lower if you don't pay off the balance.
