Definition: A variable interest rate moves up and down based on another interest rate. Variable interest rates are often tied to the prime rate or the Treasury bill rates. In certain economic conditions, variable interest rates are beneficial because they allow you to pay off your credit card or loan balance at a lower cost when the index rate is down. On the other hand, having a variable interest rate is less desirable when other interest rates increase.
If your credit card has a variable rate, it's important to pay attention to the U.S. prime rate. If the prime rate goes up, then you know your interest rate will soon go up. On the other hand, if the prime rate goes down, you know the your interest rate will soon go down.
Credit card issuers aren't required to give advance notice of an interest rate increase if your credit card has a variable interest rate.
