With the Credit Card ACT passing, you have probably seen a lot of variable rates, rather than a fixed rate.  A lot of questions generally have a concern when they don’t really know what the difference is between the two.

Like any law that is passed, all the big corporations always find loop holes to get around it and it always works!   For example, let’s take the free credit report for example.  Those sites had to specify in bigger letters up top that the government site was the place to go for this report.  This in turn probably lost them a lot of business.

What did this company do instead?  Well, they started to focus their efforts on the free credit score.  The reason I’m bringing this is up is that the credit card companies are doing the same thing with their variable rate.

The Fixed vs. Variable Rate

The fixed rate isn’t going to be the same forever and most people get that confused.  With the new law in effect, the credit card companies will have to give you a 45 day notice before they go ahead and change up your fixed rate.  If you don’t want the interest rate increase, you can always opt out of it.  By opting out, you will be able to pay off your older balances with your old rates.

The variable rate is different than your fixed rate.  As the economy moves, the rate  is going to move.  What I mean by this is that it is going to follow the index rate.  So, when you look at an interest rate for a new credit card, you may see, “Prime + 13.99%.”  This means that the prime index rate will be added onto the 13.99%.  This, again, is a way to get around those new credit card laws.

With the variable rate, they won’t have to send you a notice.  Instead, when the index rates go up, so do your rates.  They won’t have to give you that 45 day notice.  The only way you can really tell when the index is going to rise sis simply by following the Feds and when they are going to plan on increasing rates.

Both of them are going to have their ups and downs.  Regardless, as long as you pay your cards off in full, you’re going to find that you can avoid the interest rate all together!