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The Difference Between Fixed Rates and Variable Rates

When the new laws go into effect regarding the 2009 CARD act, that congress passed into law Feb 22, 2010. One of the major changes that you will see on your credit card statement, or a letter from your credit card company is a change from a fixed rate to a variable rate.

A fixed rate is simply that, a rate that is fixed at a certain percentage. Your card may have a fixed rate of 15.99%, when the CARD act goes into effect, credit card companies cannot change this without giving you a 45 day notice, at which during that time and up to 2 billing cycles later, you can cancel your card and pay off your balance at the fixed rate you had before the notice was mailed out.

A variable rate is tied to the prime rate and moves up or down as the prime rate moves, this gives credit card companies an opportunity to get more interest charges, as the prime rate is expected to rise.

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