Nothing is Constant Except Change: the Fixed Rate Credit Card (cont.)
Contributed by Alix Mcmurray
Tomato, To-mahto -- The Variety of Fixed Rate Credit Cards
What's the expression -- one man's meat is another's potatoes? Or maybe that's, "one person's fixed rate is that same person's variable rate." Even among "fixed" interest rates offered by surveyed institutions,Consumer Action survey found an average APR of 12.49% and a range from 5.5 to 21.90% Even by today's standards, those APRs do seem to creep up -- or should I say, "propagate" -- even when they're "fixed".
The Monster Lurking Inside that Fixed Rate Credit Card
Another statistic from CA's survey is that one-half of all responding institutions calculated minimum monthly payments as low as 2 percent of the outstanding balance. That's like only cutting five hairs on your head at a time -- after 10 years, you'd be as hairy as the Sasquatch. After 20 years, you couldn't be found amid all that uncut "hair" (i.e. unpaid balance). True, credit card companies exist to make money, and there's no shame inherent in that.
But who wouldn't want to pay a minimum amount each month, thinking that a good credit rating had earned them this perk? The trouble is, it's not a reward but a deferred punishment.
Constancy is a Personal Decision with Any Credit Card
Hands down, the best way to manage a credit card is to pay off your entire balance each month before the end date of the grace period. That way, a fixed rate is likelier to stay fixed. It comes down to the old adage that the only thing you should depend on is yourself.
