When A "Fixed Low Interest Credit Card" Is Bad

A fixed low interest credit card can be beneficial for many users.  It charges a low rate of interest on purchases made by the card holder and helps in terms of the predictability of the charges.  There are not many downsides to having this type of credit card, although the question being asked is when is a fixed low interest credit card bad.

If you searched this question online, you would be hard pressed to find an answer suggesting that having a fixed low interest rate credit card is bad.  To satisfy your inquiry however, let us look at what situations would make having a low interest rate that is fixed on a credit card bad for a credit card holder.

Introductory APRs

The interest rates that are available on a fixed interest rate credit card start at a low 0 percent annual percentage rate or APR.  The APR is the total interest rate charged on purchases including the stated rate of interest, fees, annual charges, penalties and other costs.  A 0 percent APR on a fixed rate card is imposed for a limited period, usually 6 to 12 months.  After this low introductory period, interest rates increase to anywhere between 7.99 percent to nearly 19 or 20 percent depending on the person’s credit rating.  This can be a disadvantaged to some card holders who see their rates steady one day and dramatically increased the next.

Changes to the Introductory APR Due to a Late Payment

A low interest rate credit card with a fixed interest may start out with a 0 percent APR but impose penalties if payments are late during the introductory period.  These penalties may require the card holder to pay higher interest rate on future purchases, effectively eliminating the low introductory rate. The card, in its contract language may also impose additional charges on the past purchases that are triggered by the late payment.  This is another function of some fixed low interest rate credit cards.

Inability to Take Advantage of Lower Interest Rates

A holder of a fixed low interest credit card may not be able to take advantage of special offers to lower their interest rates or lower their monthly costs when interest rates fall.  A variable rate card holder pays an interest rate that is more reflective of current credit card interest rates and benefits greatly from downturns in interest rates.  This is not the case for an individual card holder who pays in a fixed interest rate.