Q: I remember most cards used to have fixed rates and now I can’t seem to find any. What happened to them? Are there any fixed rate credit cards left at all in 2013?
A: One of the unintended consequences of the card reform that went into effect in 2010 was that it made fixed rate credit cards a riskier business model for banks. Why? Because in many circumstances, the reform stipulates when an interest rate can and cannot be raised. The credit card companies viewed this as a potential risk – i.e. if the prime rate shoots up, they are stuck lending money at that old fixed rate.
So just about every card issuer has since switched to variable rates, which are tied to the prime rate. That way if they prime rate increases, they also have the ability to increase the APR on low interest fixed rate credit cards.
Did low fixed rate cards ever truly exist?
While the end of fixed rates credit cards may seem like a bad thing, the truth of the matter is that they never really existed in the first place. Before the reform banks only had to give customers a 15 days notice to raise their APR. There was no guarantee in place for them to even honor that fixed rate, so you can bet if the prime rate went up, your creditworthiness changed, etc. they would find a way to raise your low interest rate. But now, there are actually laws in place protecting you against many of those abusive practice.
So are there any low fixed rate card offers left on the market? Not that I know of… all of the major issuers have switched to variable APR, so that’s what we are stuck with now. But almost all of them are tied to the prime rate and it’s unlikely that would shoot up rapidly, so you should be okay. But which one is best for you? Check out our credit cards ratings and reviews to find out!