Are your credit cards on a variable rate?

With all the recent talk about issuers of credit cards raise rates and card issuers doing all they can to maximize their profits before the new rules take effect, so do not surprising that many are moving at rates variables.

Bank of America, JPMorgan Chase, Discover Financial Services and Captial One have already changed some of their accounts at variable rates, which are based on a margin over the US prime rate.

Already, about 66% of all credit cards are on a variable rate schedule, a number expected to increase to 75% before long.

The only reason some card issuers are sticking with offers fixed-rate competition. They hope to stand out from the crowd and win more business by offering their customers a certain security regarding interest rates.

What this means to you as a credit card holder? No opinions.

Under the new laws, holders must receive 45 days notice, a fixed interest rate will change. This part of the Act comes into force on August 20 and replaces the previous rule that gave a notice of 15 days.

There is no such restriction – not even the old 15 days – if your card is issued at a variable rate. So you need to check your statement each month to see what you pay.

The use of a variable rate also removes another protection included in the new law: that of maintaining the initial rate for at least a year. Again, if the card has a variable rate, it can change at any time, without notice.

However, if you took advantage of a promotional rate, you should have a little margin. Apparently the rule that promotional rates must last at least six months remain in force, even for variable rate cards.

Financial analysts warn that interest rates across the board will continue to increase. Your fixed rate credit card issuers are required to give 45 days notice, but if you are carrying a large balance, you will still feel the effects when interest rates rise and your payment is applied to the interest to balance the reduction.

Contrary to Washington means for consumers to spend more, and thus pay more, smart consumers will work instead of paying credit card balances and become debt-free as soon as possible. Not good news for retailers, especially small businesses were forced to close as consumers struggle to cope with the new economy.

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