What is the difference between a fixed and variable APR on a credit card?

A fixed APR and a variable APR are two different ways that credit card issuers can determine the interest rate charged on your outstanding credit card balance. Here's how they differ:

1. Fixed APR:
Stability: With a fixed APR, the interest rate remains constant over time. It doesn't fluctuate based on changes in economic conditions or market interest rates.
Predictability: Fixed APRs offer predictability because you know exactly how much interest you'll pay on your outstanding balance each month.
Protection from Rate Increases: Your APR won't change even if market interest rates rise. This can provide stability if you plan to carry a balance for an extended period.

2. Variable APR:
Fluctuation: A variable APR is tied to an underlying benchmark interest rate, such as the Prime Rate or the LIBOR (London Interbank Offered Rate). When the benchmark rate changes, your card's variable APR changes accordingly.
Market Sensitivity: Variable APRs are influenced by economic conditions, so they can increase or decrease over time. They may offer lower initial rates but are subject to rate hikes if benchmark rates rise.
Risk: Variable APRs carry the risk of higher interest costs if market rates increase. However, they may also decrease if rates go down.

Key Considerations:
Introductory Offers: Some credit cards offer low or 0% introductory APRs for a specific period. These are usually variable and can change after the introductory period ends.
Disclosure: Credit card issuers are required to disclose how the variable APR is determined, often by specifying the benchmark rate and a margin (e.g., Prime Rate + 10%).
Rate Caps: Many credit cards have rate caps that limit how much the variable APR can increase in a single billing cycle or over the life of the account. Check your card's terms for these details.
Payment Behavior: Your credit card's APR can also be affected by your payment behavior. Late payments or other violations of your card agreement may trigger penalty APRs, which are typically much higher than the standard APR.

Which is Better?
A fixed APR provides stability and predictability. It's a good choice if you plan to carry a balance over time and want to avoid unexpected rate increases.
A variable APR can offer lower initial rates and may be suitable if you plan to pay your balance in full each month, but it carries the risk of rate increases.

Ultimately, the choice between a fixed and variable APR depends on your financial situation and how you intend to use your credit card. Carefully read the terms and conditions of credit card offers to understand the APR structure, especially if there are introductory offers involved, and consider how changes in the APR could impact your ability to manage your credit card debt.