Credit Cards Moving To Variable Rate

Last June, a number of credit card holders from major credit card companies JP Morgan Chase & Co. and Bank of America received notifications changing their fixed rate credit cards to variable rate cards. The variable rate will be tied to the prime rate.

Discover Financial also made a similar move earlier, moving some of their fixed rate credit card holders to variable rate credit cards this March. According to the spokespersons of these credit companies, the move was made primarily for these companies to be able to manage their business costs better given the change in the conditions of the market.

For Bank of America, almost all of their customers holding fixed rate credit cards will be moved to a variable rate plan. There are going to be some exceptions, though. These would be card holders of student accounts, debt-assistance program accounts and a number of recently opened accounts. Bank of America credit card holders will not have the option to opt out of the planned changes of the credit company. They will also most likely see the changes in their bank statements this August.

Chase credit card holders, on the other hand will have the opportunity to opt out of the move from fixed to variable rate credit cards. However, should they opt out of the change, they will have to close down their credit card accounts. According to spokeswoman of Chase, Stephanie Jacobson, the change to variable rates was made by the credit company due to the “changing costs for funding credit-card loans”. Similarly, credit card holders of Discover were also able to opt out of the move from fixed rate to variable rate credit cards and, those who did, had to close down their accounts. Discover’s change was made effective last May 1.

The move to variable rate credit cards may be a pre-emptive move of credit card companies to counter the foreseen effects of the credit card bill. With the credit card bill in place, credit card companies will not be able to change the rates of their credit cards as easily as they can right now. By moving to a variable rate credit card model, credit companies can easily implement rate hikes without having to issue notifications to their customers. Fixed rate credit cards, on the other hand require credit companies to send notices to their customers in advance before they can implement rate changes. Furthermore, when the credit card bill becomes active, credit card companies will have to issue notifications 45 days before they change their credit card rates.