This type of CD is directly tied to some index. You can win a little more if the index goes up, but you can also lose a little.
What is a variable-rate certificate of deposit?
Variable-rate CDs are a type of certificate of deposit, and as the name suggest, have a variable interest rate.
This means that instead of having a fixed interest rate like on normal CDs, with a variable CD the interest rate can go up or down during the terms of the CD.
Pros of a variable-rate CD
- It allows you to benefit from an increase on interest rate
Cons of a variable-rate CD
- High penalties for early withdrawal
- Rates could go down