Lesson 4 of 25 · 6 min
Why a variable card APR moves soon after a policy-rate change
A variable card APR takes a policy-rate move on the next cycle, not on a multi-year reset.
A variable card APR is index plus spread, the sum Track 1 lesson 13 already taught. This lesson does not re-teach that addition, and it does not re-teach how a policy rate reaches the one market it directly sets — that is Track 12 lesson 1. What this lesson adds is the card's clock: the look-up typically happens on the next cycle, like a demand facility, not on an anniversary years out.
Wick & Pell Cards shows 19.99 percent on a carried $8,640. A +0.75 point policy move that passes through becomes 20.74 percent. Extra monthly interest is $8,640 × 0.0075 ÷ 12 = $5.40. The $5.40 is not a new loan. It is the same balance, a higher daily rate, billed on the cycle that follows the pass-through.
The reset is measured in weeks. Track 1 lesson 13's variable rate recomputes whenever the index or the spread changes. A card that reprices on the next cycle is that reset on a household clock. A fixed installment, the next lesson, is the other cadence: never, until a new contract is written. One policy decision, two arrivals.
The policy move is one number. The card takes the part that passes through on the next cycle. The spread is still the other half of the sum.
Key terms
- Variable card APR
- A card rate built as index plus spread. It can move when either component moves.
- Pass-through
- The part of a policy-rate move that arrives in the card's index. Not every point of the policy move need arrive.
- Next-cycle reprice
- The card's typical look-up. Weeks, not a multi-year anniversary. Demand-facility cadence.
Worked example
Three-quarters of a point, one cycle later
Wick & Pell Cards. Balance $8,640 at 19.99 percent. A +0.75 point policy move passes through in full on the next cycle.
- Starting APR
- 19.99%
- APR after pass-through
- 20.74%
- Extra monthly interest
- $5.40
- What did not change
- The $8,640
- Clock
- The next cycle
19.99 + 0.75.
$8,640 × 0.0075 ÷ 12.
Same balance, higher daily rate.
Not a five-year reset.
The extra $5.40 is the pass-through billed on the following cycle. The policy move was one event; the card's arrival was the next statement.
Check yourself
A Tallow Yard card carries $5,120 at 18.49 percent. A +0.50 point policy move passes through on the next cycle. What is the extra monthly interest, and what is the new APR?
A variable card APR is the everyday version of index plus spread moving at the next reset, Track 1 lesson 13, on a clock measured in weeks not years. Open Variable rates: how index plus spread works →
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.