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What is the difference between a fixed and a variable APR?

A fixed APR is an APR that does not change often. Over time, a fixed APR can change due to long-term economic factors, but in this case, your credit card company must notify you of the change before it goes into effect. For example, if your credit card has a fixed APR of 18.24%, that means the APR will remain the same from month to month.

A variable APR, however, is an interest rate that is normally tied to another rate, such as the prime rate or Treasury bill rate. If the other rate changes, it is likely your interest rate will change accordingly, whether it be up or down. A variable APR can change from day to day. For instance, if you have a credit card with a variable interest rate, look in your cardholder agreement to see to which interest rate your APR is tied. Your agreement may state that your APR is tied to the prime rate and is equal to "prime + 5.99%". This means anytime the Federal Reserve raises or lowers the prime rate, your card's APR will rise or fall accordingly.

To learn more about the prime rate, click here: What is the prime rate?