Fixed Rate Credit Card Balance Transfers: Introduction and More

Credit card interest rate is rising. This can be an unpleasant surprise if you have credit card debt. Further, using fixed rate credit card balance transfers could be a wise alternative to paying down debt. Read the following explanation to know more about this issue! 

What is A Fixed Rate Credit Card?

A fixed-rate means that a credit card offers a predictable Annual Percentage Rate (APR) for a certain amount of time. The predictable interest rate may benefit your financial agenda, and acquiring a new card could potentially present you with lower interest than your current card.

The main difference between fixed-rate and variable-rate credit cards is the interest rate. A variable-rate credit card’s interest percentage can fluctuate based on market conditions or changes in the prime rate. In contrast, a fixed-rate credit card maintains a consistent interest percentage for some time.

Usually, a variable rate card allows the holder to see the interest rate as it changes occasionally, but a fixed cardholder typically can not see their card’s interest rate.

A fixed-rate credit card issuers can raise the rate if they provide sufficient notice. They must inform you more than 45 days before the rate change occurs. Moreover, the new rate will only apply to purchases made up to 14 days after you receive the notice.

Fixed Rate Credit Card Balance Transfers

This type of fixed rate credit card is specially made for balance transfers. It’s an excellent alternative to eliminate debt. Moreover, some fixed rate credit card balance transfers typically offer a 0% introductory APR for 12 to 20 months. Within these months, you can focus on paying off your debt rather than paying the added interest.

How Do Fixed Rate Credit Card Balance Transfers Work?

The average credit card interest in 2023 is 24%. Using this balance transfer card can be beneficial to reduce your monthly expenses and paying off debt quicker. Some fixed APR cards require no annual fee and allow cardholders to earn rewards. Of course, this reward comes with certain terms and conditions.

Both variable and fixed rate cards have the same purchasing power. The difference is in the payoff terms. You can transfer your current debt to your new balance transfer credit card and try to settle the debt without the interest rate added. 

Keep in mind that the balance transfer card has a transfer fee. This transfer fee is usually between 3% to 5% of the transferred amount.

How to Find Fixed Rate Credit Card Balance Transfers?

This type of card is harder to find than a variable-rate credit card. However, the most common place to find a fixed rate credit card today is from your local credit union or community bank.

This is because credit unions and community banks tend to serve their members instead of regular bank that are typically more driven by profit-minded shareholders. When you apply for a fixed-rate credit card, you will likely get a 0% introductory APR, but you should confirm the rate with your card issuer.

Tips to Avoid Paying More Balance

Regardless of the card, you should think about your budget to avoid paying more than you should. You could be paying more than you owe if you missed the payment period or other fees. Therefore, you must be careful while using a credit card. Try these tips to avoid paying more

1. Pay Each Month

If you pay your debt in full each month, the interest rate will be irrelevant because it will never apply to your purchases. But, if you can’t pay it in full each month, at least pay the minimum amount, this can decrease your credit score if you can’t pay up to at least the minimum amount.

2. Use the Auto Pay Feature

Some credit card issuers provide auto pay features, significantly decreasing the chance of missing payment. The most effective is to set this feature to pay your balance in full each month, although your bank account should have the funds to cover the bill. 

When you sign up for this feature, your default payment will be a minimum amount. But lucky you, because you can still change the setting.

In the introductory period, you don’t need to think about this very much because you have a 0% interest rate. After the period ends, it will jump between 18 to 29% interest rate. Also, if your issuer decided to increase the interest rate midway, signing up for the auto pay feature could save you from the unpredictable increase.

3. Avoid Penalty APR

Credit card holders should be focused on consequences they can control. This includes actions that can raise the interest rate, such as failing to pay the minimum payment amount for more than 60 days. Why? Because this action will likely trigger a penalty APR of up to 30%.

4. Improve Credit Score

Various data, including your credit score, determine your credit card APR. Routinely checking your debt and then paying it up in full every month can improve your credit score. As such, by enhancing your credit score, you can get a better APR in the future.

This can also take effect on your credit card limit. Your card issuer can make changes to your limit based on your creditworthiness. Therefore, your chance to get a fixed rate is getting higher. 

5. Catch Up on the Current Average Interest Rate 

The average interest rate of credit cards is changing every quarter year. In 2023, the first quarter year (Q1) rate is 20.09%, and Q2 is 24%. Consider taking another credit card with better offers if your fixed rate exceeds the current average. If your fixed rate is lower, it can be considered a good fixed rate.

The Advantages of Utilizing Fixed Rate Credit Card Balance Transfers

Overall, fixed rate credit card balance transfer offers the benefit of predictability. If you maintain an outstanding debt on your credit card every month, consider using this option. You can eliminate the interest rate and focus on paying off your debt. This will significantly help you pay off your debt quicker.

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