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Benefits and Drawbacks of a Variable Rate Credit Card
A variable rate credit card can offer you many benefits, especially when compared to cards that offer a set fixed rate. Choosing this type of card and being able to take advantage of what it offers entirely depends on what you require and your personal needs. Depending on your individual situation, you may benefit , or incur negative consequences, with variable rate credit cards.
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Changes in rates
The different types of credit cards come with their own set of rates and rewards offers. It is important for you to research and understand different options available to you. You need to assess what you will need in order to benefit from different options. When you do receive your credit card, the introductory rate will typically be offered for a certain duration of time. Once this time elapses, the card will switch to either a fixed rate or a variable rate. Each has its own benefits and shortcomings but the variable rate is a good option if you are in need of flexibility and prefer your rate to change depending on the standard global rates.
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Benefits
The different interest rates of a variable rate credit card will change over time and are dependent on global bank rates. It will either go up or down depending on global trends. One of the most beneficial factors of this type of card is that it tends to be less expensive than the fixed rate credit cards when fluctuations in interest rate are to your advantage. If the current interest rates are low then this can greatly benefit you as you will pay far less fees then you would be expected with a fixed rate.
Drawbacks
There are a few negative factors associated with having a variable rate. This type of card does present a certain factor of uncertainty as the rates will go up and down depending on the market. You will have to be aware that it can often rise unexpectedly. Even though it does cost less than a fixed rate, the bank does charge you and addition percentage over the global percentage rate. It can could you to end up having to pay more costs as the rates tend to increase steadily over time with very little decrease in fees. In other words, you will have to monitor market rates constantly.
Rates and factors
A variable rate credit card is less expensive to get then a fixed rate credit card and this can make it appealing, especially when interest rates are low. The rates you pay will have a certain factor of uncertainty and have the potential to rise over a period of time. It does ensure that you will always get the fairest fee but it can also cause you to pay costs that steadily increase over time with very little decrease.
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