Have you ever gotten a credit card bill or your mortgage statement and had the interest rate or payments go up? Unless you pay close attention, you may not notice it on the credit card bill, but I can bet you would if your house payment went up.
Adjustable or variable rate credit cards and adjustable mortgages can put you in a world of hurt if interest rates go up quickly. The low interest rates that teased you to apply, can turn your payments into an albatross.
Adjustable or variable debt instruments are tied to an index, such as the LIBOR or Treasury Bill. As interest rates rise, so will your adjustable mortgage and variable rate credit card. If you don't understand how these instruments work and what makes them move up or down, you will be better off with a fixed interest rate.
Do your homework prior to applying for a credit card or any other type of debt. Understand what type of debt you will be taking on and how your payments will change over time. Pay it off in the shortest amount of time and limit your exposure to any long-term debt. Good discipline and good habits will result in a stronger financial future.
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