What is a variable rate credit card?
A variable rate credit card is a type of credit card where the interest rate the cardholder pays can change over time. This type of credit card is different from a fixed-rate credit card, where the interest rate stays the same for the duration of the card agreement. With a variable rate credit card, the interest rate you pay is often tied to an index such as the U.S. Prime Rate or the London Interbank Offered Rate (LIBOR). This means that the interest rate can go up or down depending on the index values. In Maryland, the laws state that the cardholder must be given notice of any changes in the interest rate before the changes take effect, so cardholders are able to manage their credit card debt accordingly. It is important to keep in mind that if the interest rates rise, the cardholder’s monthly payments could also increase. This can mean that cardholders may end up paying more in interest than they would with a fixed rate credit card. Cardholders should read the terms and conditions of the credit card agreement so they understand the interest rates and fees associated with the card before they sign on the dotted line.
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