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IEEE 802.11-based devices employ rate adaptation algorithms to dynamically switch data rates to accommodate the fluctuating wireless channel conditions. Many studies observed that when there are other stations transmitting in the network, existing rate adaptation performance degrades significantly due to its inability to differentiate losses between wireless noise and contention collisions. In this paper, we first conduct a systematic evaluation on the effectiveness of various rate adaptation protocols, which try to address this issue by exploiting optional RTS frames to isolate the wireless losses from collision losses. We observe that these existing schemes do not perform well in many background traffic scenarios and can mislead the rate adaptation algorithms to persist on using similar data rate combinations regardless of background traffic level, thus resulting in performance penalty in certain scenarios. The fundamental challenge is to dynamically adjust the rate selection decision objectives with respect to different background traffic levels, as well as fluctuating wireless conditions. In light of such observations, we design a new Background traffic-aWAre RatE adaptation algorithm (BEWARE) that addresses the above challenge. BEWARE uses a mathematical model to calculate on the fly the expected packet transmission time based on current wireless channel and background traffic conditions. We implement BEWARE design in a Linux-based driver, and the test-bed experiment results show that BEWARE outperforms other rate adaptation algorithms by up to 250% in various indoor and outdoor scenarios.