We’ve written about the new credit card rules (Credit Card Act of 2009) which take place after August 20, 2009. One of the supposed provisions of the new law was that credit card companies could not raise interest rates without a written 15 day notification. This would give a chance for those with a balance to pay it off at the lower rate before the changes occurred.

But like in all laws there are loopholes. I’m sure there were many board meetings held trying to find out a way to get out of this profit limiting restriction. So here’s how they got around it: convert “fixed” rate cards to variable rate cards.

Variable rate cards have APRs that fluctuate based on the prime rate (also called an index) and a fixed rate (called a margin). The prime rate goes up or down with changes in the federal funds rate, which is set every quarter by the Federal Reserve and is the rate banks pay to borrow money from the Fed. The prime rate is 3 percentage points above the federal funds rate. As the Fed raises or lowers the rate it charges banks to borrow money, credit card accounts that have variable interest rates will see APRs increase or decrease as the prime rate rises and falls.

Under the new laws, the bank cannot increase the margin, or the number of percentage points above the prime rate, on the APR. The only way the rate can increase is the movement of the prime rate.

Bank of America Corp., J.P. Morgan Chase & Co.’s Chase Card Services and Discover Financial Services, are some of the banks that recently converted customers’ fixed rates to variable ones.

So how big a deal is this? It depends on whether or not the Fed raises rates. And since the rate is already at 0%, the interest rate on variable cards can only go up.

Have you been notified your rate can been converted to a variable rate? Tell us about it by leaving a comment.

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