In the credit card world, the term “variable” typically refers to a Variable interest rate. A Variable interest rate on a credit card is an annual percentage rate (APR) that can change over time. It is often tied to a benchmark interest rate, such as the prime rate. When the benchmark rate changes, the Variable interest rate on the credit card can also increase or decrease.
Here are some key points about Variable interest rates:
1. Benchmark Rate: The Variable rate is usually based on a publicly available interest rate index, like the prime rate, plus a certain percentage.
2. Fluctuations: As the benchmark rate changes, the credit card’s Variable APR will adjust accordingly. This means your interest charges can go up or down over time.
3. Notification: Credit card issuers are required to notify you of changes in the interest rate, usually in your monthly statement.
4. Impact on Debt: If you carry a balance on a credit card with a Variable rate, your interest charges can vary each billing cycle, making it harder to predict and manage your monthly payments.
Understanding whether your credit card has a Variable interest rate is crucial for effective financial planning and managing credit card debt.