Most US credit cards have a variable APR: the prime rate plus a margin set when you open the account. When the Federal Reserve changes rates, the prime rate moves the same day or the next, and your APR follows, usually from your next billing cycle.
The formula on your card agreement
A variable APR is written as an index plus a margin: “Prime Rate + 19.74%”, for example. The index is almost always the prime rate published in the Wall Street Journal, which matches the bank prime loan rate the Federal Reserve reports in its H.15 release. The margin is fixed when your account opens and is usually set by your credit at the time.
Large banks keep the prime rate 3 percentage points above the top of the Federal Reserve’s federal funds target range. So the arithmetic is:
Today
With the prime rate at 7.00% (in effect since Sep 17, 2026), a margin of 19.74% gives an APR of 26.74%. If the Fed cut its range by a quarter point, the prime rate would drop to 6.75% and that APR to 26.49%.
The prime rate, and an APR at a 19.74-point margin, since 2022
The figures in this chart
| Date | Prime rate | APR at a 19.74-point margin |
|---|---|---|
| Sep 17, 2026 | 7.00% | 26.74% |
| Dec 11, 2025 | 6.75% | 26.49% |
| Oct 30, 2025 | 7.00% | 26.74% |
| Sep 17, 2025 | 7.25% | 26.99% |
| Dec 19, 2024 | 7.50% | 27.24% |
| Nov 8, 2024 | 7.75% | 27.49% |
| Sep 19, 2024 | 8.00% | 27.74% |
| Jul 27, 2023 | 8.50% | 28.24% |
| May 4, 2023 | 8.25% | 27.99% |
| Mar 23, 2023 | 8.00% | 27.74% |
| Feb 2, 2023 | 7.75% | 27.49% |
| Dec 15, 2022 | 7.50% | 27.24% |
| Nov 3, 2022 | 7.00% | 26.74% |
| Sep 22, 2022 | 6.25% | 25.99% |
| Jul 28, 2022 | 5.50% | 25.24% |
| Jun 16, 2022 | 4.75% | 24.49% |
| May 5, 2022 | 4.00% | 23.74% |
| Mar 17, 2022 | 3.50% | 23.24% |
When the change reaches your bill
Card agreements say when a new index value takes effect, commonly from the first billing cycle that starts after the prime rate changes. The new rate then applies to the balance you carry, not only to new purchases.
Why there’s no warning letter
Regulation Z generally requires 45 days’ notice before a card’s APR goes up, but not when the rise comes from the index of a variable-rate plan (12 CFR 1026.9(c)(2)(v)(C)), and the rule against raising rates in the first year makes the same exception (12 CFR 1026.55(b)(2)). The margin can’t change that way: raising it is a change in terms that needs notice, and it can’t apply to an existing balance except in the cases the rule lists.
What it means in practice
- A rate cut lowers what a carried balance costs, but only a little: a quarter point on a $5,000 balance is about $12 a year.
- The margin matters far more than the Fed. On the 11 cards whose terms state their margin over prime, margins run from 12.74 to 21.74 points, so two cards can differ by 9 points of APR at the same prime rate.
- Intro 0% APRs aren’t affected while they last; the variable rate applies when they end.
Points of APR, on the same scale.
Every card page on RateHerald shows its APR worked out from its margin and today’s prime rate, with the sentence from the card’s terms.
Next
- RatesToday's prime rate and every change
- Credit cardsEvery card's APR today, worked out from its margin
- CalculatorWhat a balance costs at your APR
Sources
- CFPBRegulation Z, 12 CFR 1026.55: limits on increasing rates, and the variable-rate exceptionOpen (opens in a new tab)
- CFPBRegulation Z, 12 CFR 1026.9: when a change needs advance noticeOpen (opens in a new tab)
- Federal ReserveH.15 Selected Interest Rates: bank prime loan rateOpen (opens in a new tab)
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