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Credit Cards With Fixed Rates vs. Variable-Rate Cards

Fixed-rate credit cards may seem like a surefire way to stabilize your credit card debt, but that’s not always the case.

Justin Cupler

Contributing Writer at Tally

December 19, 2022

From secured to unsecured, from rewards credit cards to no-frills cards, credit cards have a wide range of options. They can also have different types of annual percentage rates (APRs), also called interest rates.

The two types of APR options are:

  • Fixed 

  • Variable 

What’s the difference between credit cards with fixed rates and variable rates? We answer that question along with which is more common and how you can avoid interest altogether below.

Credit cards with fixed rates vs. variable rates: What’s the difference?

When you apply for a credit card, the issuer presents you with an annual percentage rate APR (an interest rate). The credit card company determines the rate based on the following:

  • Credit score 

  • Credit history 

  • Other financial information

The higher the financial risk the company is taking by lending to you, the higher your APR will likely be.

But not all credit card rates are equal. Credit card issuers offer two APR types: fixed APR or variable APR. Let’s explore the differences.

Fixed-APR credit cards

A fixed-APR credit card means no anticipated variation in the APR. As the Federal Reserve (Fed) adjusts the federal funds rate — the interest rate banks charge each other for overnight loans — the interest rate on your card will not change.

Don’t be mistaken and think fixed-APR credit cards never change their interest rates. Per the Credit Card Act of 2009, fixed-APR cards are free to adjust your rate as long as they give you a 45-day notice

Also, the act states that “fixed rate” simply means the APR “will not change or vary for any reason over the period specified clearly and conspicuously in the terms of the account.” So, it can change, but the credit card issuer must let you know how long to expect the fixed rate in the terms and disclosures. 

The biggest downside to fixed-APR cards is that they are fairly uncommon, so finding one can be challenging, and they have limited perks. But the trade-off is a fairly consistent interest rate.

Variable-APR credit cards

A variable-APR credit card has an interest rate that fluctuates, using an index to determine each cardholder’s rate. The prime rate is a common index that lenders use to determine interest rates.

Each bank is free to set its prime rate, but they often follow the lead of the federal funds rate's target level by adding about three percentage points to this rate. So, if the Fed raises the federal funds rate from 3% to 3.25%, credit card companies may raise their prime rate from 6% to 6.25%.

On top of the prime rate is a margin rate, a specific number of percentage points added to the prime rate to come up with your final APR. The margin rate is based on your creditworthiness, and it generally only changes if your credit improves and you request a lower interest rate that the credit card company approves.

For example, you may get a 15.99% margin if you have average credit. So, if the prime rate is 6%, your total APR would be 21.99%. However, if you later have good credit and ask for a better interest rate, your credit card company may approve you for prime plus a 12.99% margin rate, making your total APR 18.99%. 

A variable-rate credit card does not have to give you a 45-day notice if your APR increases due to a fluctuation in the index it follows. However, if the credit card company increases your rate for any other reason, it must provide you with a 45-day notice. 

While dealing with variable interest rates can be frustrating and confusing, there are benefits to variable-rate credit cards. 

First, if you have good credit, many have great offers, like 0% balance transfer and purchase APR for up to a 12- to 18-month introductory period. Second, some of the best credit card perks are far more common on variable-rate credit cards, such as:

  • Higher-value cash back rewards programs at select merchants, like grocery stores

  • Statement credits in place of rewards

  • Free membership to Global Entry or TSA PreCheck

  • Special financing on large purchases

Another benefit to a variable-rate credit card is your number of options. You can choose from a huge collection of cards, including Capital One, Discover, Citi, Chase Freedom Unlimited and more.


Are credit cards with fixed rates or variable rates more common?

Most of today’s credit cards are variable-rate cards. This offers more attractive rates upfront to bring in new customers, with the ability to tweak the rate as the market changes. This doesn’t mean fixed-rate credit cards are extinct.

Credit unions are the most likely places to find fixed-rate credit cards. Let’s look at a few options.

UNIFY Financial Credit Union

UNIFY Financial Credit Union has three fixed-rate Visa credit cards: Platinum, Gold and Classic. These cards offer credit limits of up to $50,000, $14,999 and $4,999, respectively, and have a wide range of perks like online card management, rental car collision damage waiver, warranty manager service (Platinum and Gold only) and optional debt protection.

These cards have no annual fee, cash advance fee or balance transfer fee and the fixed APR can be as low as 9.49%. As of November 2022, these fixed-rate credit cards also offer a special intro APR of 5.49% on all purchases and balance transfers.

First Federal Credit Union

First Federal Credit Union has two fixed-rate credit cards, Visa Premium and Visa Ca$h Rewards cards. The Visa Premium card has no annual fee or balance transfer fee and comes with a fixed rate as low as 6.99%. However, that rate may also be 8.99%, 10.99% or 12.99%, depending on your creditworthiness.

The Visa Ca$h Rewards card earns you 2% back on all purchases. It also has no annual fee, a 25-day interest-free grace period on all purchases and a fixed interest rate as low as 8.99%. Your APR can rise to 10.99%, 12.99% or 14.99% based on your creditworthiness.

Ardent Credit Union

Ardent Credit Union has the most options with four credit cards with fixed rates.

For those looking to build credit, there’s the Visa Secured card with a fixed 17.90% APR. This no-frills secured credit card has a $25 annual fee and no other notable perks. Plus, you must secure it with an interest-bearing Ardent savings account.

The Visa Classic credit card offers an APR as low as 9.99%, a 1.99% introductory APR period for 12 months and an auto rental collision damage waiver. Because it has a lower APR, this card has no other perks other than no annual fee.

Moving up to the Ardent Visa Gold gets you a 10.96% APR after a 1.99% introductory rate for 12 months from account opening. You also get $500,000 in travel and accident insurance, an auto rental collision waiver, identity theft protection services and no annual fee.

Finally, with the Ardent Visa Platinum, you get an APR as low as 10.88% after an intro APR offer of 1.99% for 12 months. You also get some extra perks, such as one reward point for every dollar spent, a free concierge service for tickets and reservations, $1 million in travel and accident insurance, up to a $25,000 credit limit, an auto rental collision waiver, identity theft protection services, no annual fee and more.

How can you avoid interest charges altogether?

Having a low APR and credit cards with fixed rates is great, but you can pay no interest charges with careful management of your credit card debt no matter what your APR is. Use your credit card for daily expenses or to make a large purchase, as long as you have the cash to pay the balance in full by the due date.

By paying the balance in full by the due date, you’re wiping out your credit card balance within the interest grace period so that the credit card company won’t add interest charges to your account. Moreover, if you use a cash rewards credit card, you’ll still earn all your rewards points without paying a dime of interest.

Credit cards with fixed rates are available but relatively uncommon

If you want a credit card with a fixed rate, you may have trouble finding one that suits all your needs. But they are available from several credit unions with a handful of perks. Variable-rate credit cards, on the other hand, are far more common and have some of the best credit card rewards and perks in the industry.

Either way, you can avoid all credit card interest charges by paying your statement balance in full by the due date, making the interest rate unimportant.

Has credit card debt become overwhelming for you? If so, look at the Tally† credit card debt repayment app. The app helps you manage your credit card payments, and Tally offers a lower-interest personal line of credit, allowing you to efficiently pay off higher-interest credit cards. 

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 to $300.