Beat the Rising Cost of Credit
Rates are up sharply over the past year and a half, which makes whipping out the plastic a lot more expensive. These strategies should help.
By Amanda Gengler

(MONEY Magazine) – What's New

Moving in lockstep with Fed hikes, rates on most variable-rate credit cards have jumped more than three points in the past 18 months, to an average of 12.6%. Fixed-rates, meanwhile, have stayed stable at about 11%, although more and more issuers are now switching from fixed to variable rates.

Best Strategies

• Go for the fix. Shop around for the lowest rates, favoring slow-to-rise fixed-rate cards. Just be aware: Issuers can boost fixed rates too or convert them to variable rates with little notice.

• Freeze your terms. If your rate is raised, some issuers will let you pay off the balance at your current rate--if you stop using the card.

• Lock in promotional deals. As rates go up, 0% introductory offers are growing scarcer and low-rate periods are getting shorter. So if you're looking to transfer a balance, act sooner, not later.

• Outlook

Look for variable rates to rise as much as one full point more by mid-year. In the second half of 2006, rates should stabilize but not drop.

SAVINGS NOTES AND SOURCES: CD and money-market account data as of Dec. 13 from 100 Highest Yields ($124 for 52 issues; 800-327-7717). Average tax-exempt and taxable money-market fund yields for the week ended Dec. 13 from Money Fund Report (; all have a minimum investment of $10,000 or less and assets of $25 million or more. Average bond fund yields for the month ended Nov. 30 from Lipper; all are medium- and high-quality funds without sales loads and with average maturities of three years or less. [1] Manager absorbed all or some operating expenses. CREDIT NOTES AND SOURCES: All rates subject to change. Credit-card rates are for standard cards as of Dec. 13 from and are variable unless otherwise indicated. Survey does not include Internet-only cards or AmEx Blue. [1] Visa only. [2] Fixed rate. [3] MasterCard only. [4] Platinum and gold cards.