I have decided to get a new credit card.

However, when looking through the various options for cards, it seems like all of them are variable rate cards.

What's the downside to using fixed- vs variable-rate interest credit cards.

Is the bank going to decide to hike my rate, if they've been having a bad year?

  • Can someone edit the question title to include "for credit cards" - the answers would be a lot different for other loan types. I do not have enough hit points to edit the question.
    – Tim
    Commented Oct 4, 2010 at 21:42
  • @Tim. Good catch. Done
    – mpenrow
    Commented Oct 4, 2010 at 21:54
  • I am not sure if new rules changed this, but essentially all banks typically can change the rate at any time on you.
    – Tim
    Commented Oct 5, 2010 at 0:41
  • Banks apart from hiking the rates during bad year, normally also increase the rate if they find that credit card is not paid in full. The rational being that someone who is not consistently paying in full has a higher risk of default and hence higher rate.
    – Dheer
    Commented Oct 5, 2010 at 3:32

2 Answers 2


There is no downside if you don't carry a balance. Just pay it off every month and the interest rate is irrelevant.

With interest rates on credit cards, the bank can decide to up your rate at any time. I have a card that I got with a 9.99% interest rate that was fixed. After about a year it was upped. Now 5 years later the interest rate is like 18.99%. Since I don't carry a balance it has no affect on me.


John - you should find a card that offers the best rewards. 2% cash back is pretty high up there, some will offer more for specific purchases, but not all. Then you should pay the card in full each month. I get 2% into my daughter's 529 (college savings) account and I actually have no idea what the rate is. It could be 24% for all I know. I always pay in full so I don't care.

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