Why Credit Cards Are Switching to Variable Interest Rates
In the past few months, all my credit card issuers have sent notices that my fixed interest rate is being converted to a (higher) variable interest rate. My most recent notice says "The economic environment has required that we make changes to your account." If you've received these notices recently, you may have wondered why is the rates are changing?
You probably know that new credit card regulations go into effect next February. These new regulations only allow credit card issuers to raise fixed interest rates under certain circumstances and require them to give you a 45-day advance notice of rate increases. The rules aren't the same for variable interest rates, though.
Variable interest rates can change whenever the underlying interest rate changes. Not only that, your credit card issuer doesn't have to send an advance notice before your variable interest rate changes. Your credit card issuer won't have to worry about adjusting your interest rate when the economy changes, because your variable rate will be tied to another interest rate that already changes with the economy.
Variable interest rates are better for credit card issuers. With so many credit card issuers moving to variable rates, the new credit card laws for interest rate increases may not help cardholders.
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The credit card companies are months ahead of the curve all the time. They always know how to make the most money off of us.
John DeFlumeri Jr
They cannot make much money if you don’t use the card.
1. Always use your card judiciously.
2. Always pay for goods in cash whenever possible.
3. Separate needs from wants..
4. Purchase wants with cash.
5. Needs are the things you have to have. (examples are stoves,
furniture, clothes, washing machine, dryer, items such as that
6. Pay needs off as quickly as possible Do this before you start
putting wants on a credit card.
7. Keep your card spending to within 20% of your income. Example if your gross annual income is $10,000 per year, your
credt card spending should not exceed $2000.00 You should limit yourself to only one credit card in this income bracket.
If you have more than one credit card, the limit still applies.
You cannot have $2000 on each card, otherwise you are overyour limit.
8. Avoid department store credit cards. Use only a bank issued credit card.
9. Do not be influenced by those periodic letters sent out by credit card companies that tell you “Congratulations: because of your excellent payment record we are increasing your credit limit by said dollar amount.” The amount they increase it can
very well exceed your 20% limit that is based on your annual income. Card companies want you to spend. How you pay for it is your problem
10. Remember the more you chargw on you credit card, the more goes to finance charge and less on principle. Always pay more than just the minimum amount due.