In an ongoing effort to ward off recession concerns, the Federal Reserve has been slashing interest rates. What does this mean for you? It can mean a whole lot, especially when it comes to credit cards. Now is a perfect time to take advantage of dropping rates. You can apply for a low interest credit card and watch your savings add up. Read on to learn about low interest rate credit cards and what to look for when shopping for one.

The Federal Reserve sets an interest rate that is used for overnight loans between banks. This rate serves as a guide for the prime rate, which is the interest rate banks give to their most reliable customers. It is often 3% above the rate set by the Federal Reserve. So if the Fed Funds rate is 3%, the prime rate may be 6%.

Many credit cards come with a variable interest rate. This rate is tied to the prime rate. As the prime rate rises and drops, so does the interest rate on the credit card.

If you currently have a credit card, check to see if the interest rate is fixed or variable. A fixed rate generally does not change, but a variable one will. If you have a variable interest rate, you should see a drop in the APR (annual percentage rate). Call the card company to check on your rates.

Switch Cards for A Better Rate

If your credit card currently has a high interest rate, or a fixed rate, now may be the time to get a new card. A lower rate card can help you save hundreds of dollars. Consider the following: if your card has an interest rate of 20%, and you carry a balance of $7,000 for a year, you'll fork over $1,400 in interest. With a rate of 10%, you'll pay only $700 over a year on the same balance. That's a savings of $700, just for switching credit cards.

Other Benefits

While the biggest benefit of a low interest rate credit card is the savings, there are other factors to consider. Many include an initial 0% introductory rate on purchases. Others offer 0% interest on balance transfers. This lets you bring over an existing balance from a card with a high interest rate. By getting a lower interest rate, you can pay off the debt fast.

Low interest rate credit cards come with a variety of other features. You can earn points for travel benefits or miles toward airline tickets. You can also select from cash back offers and other reward programs. You'll want to consider these factors, as well as the interest rate, as you shop.

Apply Online

One of the best ways to look for a lower rate on credit cards is through credit card websites. These let you compare different benefits side by side. When you find what you want, the application process takes only a few clicks.

With a low interest rate credit card, you can take advantage of the dropping interest rates. The lower rate will help you get rid of debt and save on interest expense. Compare your different options and then apply online. You'll be glad you did so.