How Does a Fixed Rate Credit Card Work?
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Account Application
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The credit card company will require an application from the person wanting the credit card. That application will often display an interest rate, but the company is not obligated to give the borrower that rate unless the applicant meets certain requirements.
Contract Agreement
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Once the application has been received, the credit card issuer will approve or deny the application. At this time, the terms of the credit card are set by the credit card agreement which is a contract between the lender and the card holder. The fixed interest rate will be noted in this contract.
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No Market Fluctuations
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The interest rate of the fixed interest rate card will not go up or down regardless of any market actions such as rising interest rates or Federal Reserve Actions.
Rate Changes Can Happen
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Even with a fixed interest rate, credit card agreements and banking laws allow the company to change the interest rate with a certain amount of notice, typically 30 to 90 days. So while the interest rate is fixed in that it will not change due to market events, it can still be raised by the credit card company.
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