Man looking in a binoculars
Stephen Mallon/Getty Images

Locking in a credit card with a fixed interest rate is a challenge.

Banks and credit unions are hesitant to let borrowers snag a card that won’t keep up with rising interest rates set by the Federal Reserve. The rate hikes mean financial institutions pay more to borrow from one another, and they tend to pass that cost on to consumers.

Consumers could beat the bushes looking for a line of credit that comes with a steady, low interest rate, or they could save themselves the time and trouble and find a promotional rate that meets their needs.

Fixed-rate cards are ‘virtually extinct’

Less than 5 percent of the 2,335 credit card agreements on file with the Consumer Financial Protection Bureau were related to cards with fixed or non-variable interest rates. Most of the roughly 60 fixed-rate agreements on file came from small lenders with limited regional footprints, according to a Bankrate analysis of the CFPB card agreement database from first quarter 2018.

Fixed-rate credit cards are “virtually extinct,” according to Greg McBride, CFA, chief financial analyst for Bankrate.com.

The number of fixed-rate cards available dwindled after The Credit Card Accountability, Responsibility and Disclosure Act — or CARD Act — took effect in 2010. The law mandated that card issuers give fixed-rate borrowers at least a 45-day notice before hiking rates.

Cards tied to federal interest rates don’t require the same heads-up before rate increases, which prompted many card issuers to pull back on fixed-rate products and push out variable-rate options.

“In this environment where interest rates are rising, you’re not likely to see fixed-rate cards come to market because variable-rate cards are built for an environment like this,” McBride says. “When rates are going up, rate hikes get automatically passed through to cardholders.”

In September, policymakers raised their benchmark federal funds rate by another quarter of a percentage point, lifting it to a range of 2 to 2.25 percent.

Fixed-rate cards on the market

Not all lenders have ditched fixed-rates, however. Colorado-based On Tap Credit Union offers the Summit Visa and Rewards Visa options with annual percentage rates as low as 7.9 percent and 11.9 percent, respectively. The rates borrowers can nail down depends on their creditworthiness.

The fixed-rate card is far less popular than you would think, says Ed Flores, director of enterprise risk management at On Tap Credit Union.

“My hunch is financially savvy people usually don’t carry balances so they don’t care what the rate is. They use rewards cards,” Flores says. “The people who should care, either don’t understand cards and card products or don’t put forth the effort to improve their situation.”

Visa tends to be the payment processor behind the fixed-rate cards available, according to the CFPB data. In addition to handling services for On Tap’s cards, there’s also the Visa Platinum Credit Card from Achieve Financial Credit Union of Connecticut and the BIG Rewards Credit Card from North Coast Credit Union of Washington.

California Coast Credit Union, for one, works with MasterCard to offer the non-variable Platinum and Platinum Choice Rewards credit cards.

Fixed-rate cards may have been relatively painless for credit unions like On Tap during the so-called quantitative easing period where the Fed bought up Treasury bonds and mortgage-backed securities to push down long-term interest rates. But Flores says, “With rates rising, I assume the most ardent defenders of the product will have a change of heart soon.”

Other credit card options

Finding a low-rate option doesn’t take calling around to small lenders or scouring through the CFPB database, McBride says.

“Your best bet is a card that offers a low introductory rate that’s set for a pre-specified period of time,” he says. “If you have good credit, you can find a promotional rate that meets your needs whether it’s transferring an existing balance or it’s a large upcoming expense that you can’t pay for out of pocket but that you don’t want to finance in a rising interest environment.”

Learn more: