Benefits And Drawbacks Of A Variable Rate Card

Benefits And Drawbacks Of A Variable Rate Card



Benefits and​ Drawbacks of​ a​ Variable Rate Card
if​ you​ are looking at​ a​ credit card, then you​ might be looking to​ choose between a​ variable rate or​ fixed rate card .​
Although fixed rate cards are easy to​ understand, working out whether a​ variable card is​ right for​ you​ or​ not can be trickier .​
if​ you​ are interested in​ learning about variable rate credit cards, then here are some of​ the drawbacks and​ benefits of​ such cards.
What does variable mean?
A variable rate card means that the interest rate on​ the card will change along with the Bank of​ England​ base rate .​
The credit card issuer will track the base rate of​ the Bank of​ England​ and​ then add a​ percentage to​ that .​
for​ example, if​ the base rate is​ 4% and​ the card issuer adds 5%, then your​ credit card rate will be 9% .​
if​ the base rate increases or​ reduces then your​ interest rate will change .​
for​ example, if​ the base rate fell to​ 3.5% then your​ rate would reduce to​ 8.5%.
Costs of​ a​ variable rate
Variable rate cards are generally cheaper than fixed rate cards, although obviously you​ have the potential risk of​ the interest rate increasing over time .​
of​ course, the fees and​ other terms of​ variable rate cards vary from issuer to​ issuer, and​ you​ need to​ shop around to​ find a​ package to​ suit your​ own needs.
Interest rates low
At the moment, getting a​ variable rate card is​ properly a​ good bet, because interest rates have been low or​ falling for​ the last decade or​ so, and​ there is​ no indication​ that they will rapidly increase in​ the near future .​
Even if​ they do increase, interest rates take a​ while to​ increase significantly, and​ even a​ change of​ 1% can take a​ year or​ so .​
Although relying on​ the market to​ get lower isn't a​ good way to​ choose a​ credit card, at​ the moment the market looks fairly good for​ getting variable rate cards.
Fixed cards
Although variable rate cards generally have higher interest rates, you​ can at​ least be certain​ that the rate will not change over the next few years .​
if​ you​ want the peace of​ mind that your​ interest rates will remain​ the same, then a​ fixed rate card will be a​ good choice .​
if​ the interest rates were to​ rise in​ this​ time then you​ would definitely save money as​ well as​ having security .​
if​ you​ think interest rates will rise then go for​ a​ fixed rate card.
Paying off your​ balance
of​ course, whether you​ get a​ variable rate card or​ fixed rate card is​ irrelevant if​ you​ pay your​ balance off in​ full each month, because you​ won't be paying interest .​
if​ you​ are someone who pays their balance off in​ full regularly, then you​ should get a​ variable rate card as​ the rates are likely to​ be cheaper if​ you​ don't pay off the balance.




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