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What is Variable Rate?

A type of interest rate that can change over time.

Definition of Variable Rate

A Variable Rate, also known as a variable interest rate, is a type of interest rate that can change over time. This means the amount of interest you pay on borrowed money, such as on a credit card or loan, can go up or down over time, usually in relation to changes in the economy, market conditions, or a reference interest rate like the U.S. Prime Rate.

For example, if you have a credit card with a variable rate of 18%, the interest rate isn't fixed. If interest rates in the economy go up, your credit card's interest rate could rise too, meaning you'd pay more interest on your remaining balance. Conversely, if interest rates go down, you could end up paying less. This is why it's called a 'variable rate' – because it can vary or change.

Note, the Yendo card has a fixed rate.

3 things to know about Variable Rates

1. Rate Changes Can Impact Your Payments: If you use a credit card with a variable rate, remember that changes in the rate can affect how much you need to pay back. If the rate goes up, you will likely end up paying more in interest on your balance and your payments could become more expensive.

2. Best When Rates are Low: Variable rates can be beneficial when interest rates in the general economy are low and expected to stay that way for a while. That's because you could pay less in interest on your credit card balance.

3. Not Always Clear: It's not always clear when and why the rate could change. Rates are often tied to indicators like the U.S. Prime Rate, but understanding when those alter and what that means for you can be tricky. It's critical to be aware and prepared for potential changes that could occur.

Disclaimer: Yendo is not a provider of financial advice. The material presented on this page constitutes general consumer information and should not be regarded as legal, financial, or regulatory guidance. While this content may contain references to third-party resources or materials, Yendo does not guarantee the accuracy or endorse these external sources.