Credit card deals consisting of low variable interest rates are often available.  Though these rates may seem attractive, are they a good choice? 

To make an educated decision, one should understand the fundamental difference between variable and fixed rate credit cards.  Fix rates basically remains unchanged.  New government regulations forbid credit card issuers to increase fixed interest rates on new purchases during the first year a credit card is issued.  After the initial year, credit card companies must give cardholders a forty-five day notice before making any changes to the interest rates.  The new credit card laws also rule out increasing fixed interest rates on existing balances, unless a cardholder is more than sixty days late on their payments. 

Variable rates are simply as the name implies.  These rates are based on a changing index that can be unpredictable.  The best economists in the world will not be able to tell you what the prime rate will be the following year.  Before applying for a variable rate credit card, one should ask themselves a few questions. 

First, consumers should find out what the credit card rate index is based on.  Variable rate cards are typically based on the prime rate.  After the index is found, determine its performance and current rate.  Secondly, find out the amount the credit card issuer adds to the index.  This is known as the rate margin.  Next, determine the frequency in which the rates change.  Finally, the most important question is to ask yourself how important certainty is to your financial situation.  If an individual plans to carry a balance from month to month, a fixed rate card might be more beneficial for budgeting purposes.  On the other hand, those who can handle a bit of financial uncertainty can take advantage of the lower interest rates variable credit cards have to offer.