You knew that when credit card issuers were given rules to follow, they’d find some new way to increase profits. Issuing cards with variable rates is one of those ways.

At least 4 of our major credit card banking giants have already switched part of their accounts to variable rates, and more are expected to follow. Variable rates are generally offered at a set margin over and above the U.S. Prime Rate, which will allow card issuers to float their rates up and down in keeping with prime.

Surprisingly, we learned that about 66% of all credit cards are already on a variable rate schedule, with that number expected to reach 75%.

What does this mean to you as a consumer? It means that your credit card issuer will be free to step around the new rules and raise your interest rates with no notice. Under the new laws, the old “rule” that required 15 days’ notice was changed to 45 days. But because it’s tied to Prime, a variable rate can change at any time without notice.

The new law that changed notice time from 15 to 45 days is scheduled to go into effect on August 20, along with a provision that restricts interest rate increases during the first year of card ownership. That provision also goes out the window when the card is offered at a variable rate.

The only exception is if you get in on a Promotional Rate. Those still come under a rule that says promotional rates must last for at least 6 months.

Read all the fine print in offers, and look for cards that still offer fixed rate options. Some will, because they’ll see it as a marketing tool to set them apart from the competition.

Financial analysts expect interest rates across the board to continue on their upward spiral. Your credit card issuer may give you 45 days’ notice instead of 15, but if you carry a large balance and do not have the means to pay it off or move it within the 45 days, you’ll still be stuck with the high interest.

The best advice they give is to pay down accounts as fast as you can, before your interest rates rise, causing the bulk of your payment to go to interest rather than principal reduction.

The Administration may want people to spend more in order to “stimulate” the economy, but the best individual course of action right now is to spend less and pay off debt.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

This entry was posted on Thursday, July 23rd, 2009 at 8:04 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.